Costco warns Middle East tensions could hit costs

Global tensions are increasingly becoming a concern for retailers. Even before the recent Iran conflict erupted, tensions overseas have been fueling economic uncertainty here in the U.S. And no retailer is really immune.The problem is that when geopolitical disputes occur, they can escalate into trade wars, leading to tariffs and supply chain disruptions. This inevitably makes goods more expensive for retailers, who then have to pass the cost along to consumers.That's something Costco has always gone out of its way to avoid.Roughly one year ago, during Costco's second quarter 2025 earnings call, CEO Ron Vachris said, "It is difficult to predict the impact of tariffs, but our team remains agile and our goal will be to minimize the impact of related cost increases to our members."Vachris also confirmed that about one-third of U.S. products sold are imported from other countries, and so the company would "continue to rise to this challenge by leveraging our global buying power, strong supplier relationships and innovation."Middle East tensions could raise costsThe current conflict in the Middle East is already driving oil prices up. And the fear is that the cost of consumer goods will increase broadly due to a rise in energy, transportation, and production costs.Costco admitted during its most recent earnings call that the situation in the Middle East could eventually affect operating costs if disruptions intensify.Related: Costco cuts prices on eggs, butter, other staplesCFO Gary Millerchip said, "The situation in the Middle East could impact fuel costs and shipping schedules if there is instability in the region for a sustained period of time."So far, however, Costco says the conflict has not significantly disrupted its supply chain. Costco is also well positioned to avoid such disruptions due to the strength of its Kirkland brand. Plus, the company said it's willing to source more products domestically as needed to keep prices as low as possible.As Vachris said during the company's second quarter 2026 earnings call, "At Costco, we always want to be the first to lower prices and the last to raise them." Shutterstock Costco has a big advantage over its rivalsCostco is sometimes criticized for having a limited selection of goods. But in a situation like this, that strategy can actually work to Costco's advantage.Costco typically limits its inventory to about 4,000 SKU (stock keeping units), whereas a typical supermarket might carry anywhere from 15,000 to 60,000. But this streamlined approach gives the company flexibility to adjust suppliers or product mix when costs change.Another advantage is Costco's scale. As the company confirmed on its most recent earnings call, it operates 924 warehouse club stores on a global level and has plans to keep expanding. That gives Costco a huge amount of buying and negotiating power. Plus, unlike traditional retailers, Costco can use the membership fee revenue it collects as a cushion, allowing it to avoid massive price hikes when other companies might have to implement them.More Retail:Costco sees major shift in member behaviorRetail chain shuts all locations as legal changes hit industryCostco makes major investment in online shopping for membersLululemon struggles to reverse concerning customer behaviorT-Mobile launches free offer for customers after major lossEven though the situation overseas is volatile, Costco is in a strong position to protect its members from rising costs. And it's that very ability that could allow Costco to come out a winner at a time when other retailers risk losing customers.Maurie Backman owns shares of Costco.Related: Dollar Tree CEO signals tough times ahead for bargain hunters