How Conflict in Iran Is Squeezing Packaging and Label Printers

What was shaping up to be a stable year for packaging and label converters has quickly shifted. Around this time last year, Mike Murton says that many of OMNI Systems’ customers were mapping out their plans — and based on those outlooks, the Mayfield Village-Ohio-based label converter’s president and CCO expected a year of modest, steady growth.

“There was stability in supply coming from the raw material suppliers, weren’t any major conflicts going on in the world that hadn’t already been going on there,” he says, noting that OMNI could use this stability as an opportunity to pass some savings to customers, or to try to bring in new customers.

But then the conflict in Iran began.

“What we thought was going to be a year of price stability is now a year of pretty aggressive cost pressures coming into the market that we're working to navigate not only with our suppliers, but also with our customers,” Murton says.

What’s Happening in Iran

On Feb. 28, the United States and Israel launched a joint airstrike on Iran. As wars are typically unpredictable, there has been little clarity about what the end of this one will look like.

One of the major focal points of the conflict has been the closure of the Strait of Hormuz. In 2025, the strait saw an average of 20 million barrels of crude oil and oil products pass through it each day — comprising roughly 25% of the world’s seaborne oil.

Because of the closure, shipping traffic has decreased significantly. In a typical month, about 3,000 ships pass through the strait, which measures 24 miles at its narrowest point. But recent data shows that only 54 vessels traversed the strait in the entirety of March — a decrease of 98.2%.

Impact on the Supply Chain

These conditions have caused oil prices to jump — something printers and converters need to keep a close eye on.

“The price of fuel affects everything, right?” says Dave Taylor, CEO of TAVO Packaging, a folding carton converter in Fairless Hills, Pennsylvania. “… [The U.S. is] the largest oil producer in the world, so it impacts us less, but I think it has a great effect on people in other parts of the world, which in turn makes the stuff we buy more expensive.”

The rising cost of oil is also tied to the cost of gas, which in turn increases transportation costs. As Andy Paparozzi, chief economist at PRINTING United Alliance, notes, everything from equipment to inks gets delivered by diesel-powered trucks.

“These broad-based cost increases will work through our industry, they'll work through the economy, we'll see producer prices rise first and then consumer prices,” Paparozzi says. “And the problem is once inflation gets a foothold in the economy, it's not easy to dislodge.”

The other key indicator converters and printers need to monitor is long-term interest rates. Paparozzi explains that long-term interest rates — which are used for business and consumer loans and for mortgage rates — are set by international bond markets. These rates increase due to:

1. Acceleration of inflation.
2. Significant expansion of America’s budget deficit, which happens during wars.
3. Increase in geopolitical risks.

With all three of these conditions met, long-term interest rates are rising.

“Rising interest rates affect everything from the stock market to capital investment to the housing market,” Paparozzi says. “So that too will work its way slowly through our industry and the economy at large.”

Closely tracking oil prices, long-term interest rates, and your company’s KPIs — and, importantly, being ready to act on them — is key to navigating these pressures, Paparozzi says.

Packaging-Specific Cost Increases

As Paparozzi notes, the primary materials being affected by the war are oil-derived products.

“When the price of oil increases, that directly increases the cost of producing plastics and film and all the other stuff used in flexible packaging — not to mention the thousands of other products that are made from petroleum,” he says.

According to Taylor, one area he’s seen affected is poly-extrusion paperboard, which is coated with polyethylene to improve the durability for applications such as food-service packaging.

Additionally, aluminum prices had already reached a four-year high the day before Israel and the U.S. launched their initial attack. Prices have continued to increase due to supply chain pressures.

The supply chain was further squeezed on March 28, when two of the largest aluminum smelters in the Middle East were targeted in Iranian attacks. This raised concerns for the U.S., which imported nearly 22% of its primary and alloyed aluminum from the Middle East in 2025.

It’s important to note that the price increases tied to the war in Iran are not happening in a vacuum. As Taylor points out, tariffs have had a lasting impact on equipment upkeep.

“The upward, inflationary push has definitely increased the cost of equipment and parts and spare parts and maintenance items significantly,” he says.

Responses to Packaging-Related Increases

According to Murton, OMNI Systems customers have held back on plans they made before the conflict.

“We’ve seen projects with customers get delayed as they're navigating these things,” he says. “We saw similar things last year when tariffs started to come about; people had project plans in place, and they had to pivot to commit resources to it. We're seeing similar actions there … , but once we get through what this bubble is going to be, people are going to go back and get focused back on those key strategic projects.”

And as printers and converters consider and implement price increases, Paparozzi expects packaging and label buyers to react negatively.

“I would expect to see resistance to price increases stiffening, because remember: All this is affecting our industry's customers. Their margins are under pressure, too,” Paparozzi says. “So now you've got operating cost inflation accelerating. You've got resistance to price increases stiffening. What does that add up to? That adds up to a classic, textbook profit squeeze.”

To help mitigate impacts on business, Murton says OMNI Systems has developed its own “playbook” for situations that disrupt its supply chain in some way. It’s something every converter should have, he stresses. Collaboration is central to the playbook — with both suppliers and customers.

“There's a lot of talk around what other things we can do to help manage costs, because consumers can only absorb so much of the cost until they'll look for other places [to buy],” Murton says. “So, our suppliers, ourselves, and then our customers all have to find ways and share in that pain to figure out a way to keep costs manageable so consumers keep buying products.”

On the supplier side, Murton highlights several potential routes to mitigate costs, ranging from bringing in inventory early to requesting a lower price than a supplier’s announced increase. When communicating with customers, it’s crucial to discuss upcoming price increases proactively.

“Don't go try to gouge them, but maybe pass off to where you're covering your costs,” Murton says. “If you have multiple inputs coming in, understand what that percentage of cost goes into the product so you can articulate to your customer why they're getting that type of an increase — and not that you're trying to pad your margin by a few points by doing it.”

Not only is communication with your suppliers and customers important, but so too is communication with your employees.

“Everybody's wondering where this is going to go — how it's going to affect me,” Paparozzi says. “‘Is it possible, if this thing really does turn sour, might we have layoffs, or at least reductions in hours?’ Also, I think it's very important to help employees understand how it's affecting the business and what the business is doing to lessen the effects.”

Meanwhile, Taylor notes that TAVO Packaging has an extended pricing review cycle, which has been a challenge in the past.

“During COVID, I had a quarter where we were just losing money left and right because the cost of inflation was so high, we couldn't capture it fast enough to avoid it,” he recalls. “Wood pallets used to be $6 a pallet, and we're paying 22 [dollars] during COVID. The prices have since dropped, but that's an example. … Then once we rebounded, we had to do pretty significant price changes.”

As of writing, the war has yet to present a similar challenge for TAVO — but Taylor expects to have a better sense of where prices stand come summer.

Advice for Printers and Converters

Given the inherent uncertainty of war, printers and converters may be tempted to delay investments and major decisions until there is greater clarity. However, Paparozzi says this is a mistake.

“The opportunity is really to create clarity, to move ahead with capital investment plans that support productivity, automation, production speed, workforce development plans, diversification plans, promotional plans,” he stresses. “All the kinds of things that are pillars of long-term profitability, you want to move ahead with them. You don't want to wait for clarity, because if you wait, you're going to fall too far behind.”

Murton agrees, emphasizing the importance of taking initiative.

“The market's eventually going to look to reset itself, or that'll become the new normal,” he says. “And nobody wants to be looking there later to say, ‘I have less market share today than I did prior to this, because I wasn't strategic in how I went about and engaged it.’”

Paparozzi sums up what’s at stake succinctly: “Every disruption creates opportunity. Somebody comes out of the disruption stronger than they went in.”