Tariffs Were Already Hurting Small Businesses. The Iran Conflict Is Making It Worse.

Small businesses were already dealing with tariffs that tripled their customs payments. Now, three weeks into a military conflict that threatens 20% of the world's oil supply, they're facing a cost crisis on two fronts.

The Tariff Toll

The numbers are stark. According to the National Small Business Association's 2026 Trade Impact Survey:

• 61% of small businesses report that 2026 tariffs have negatively impacted their operations
• Average monthly customs duty payments have tripled — from $8,400 in January 2025 to $27,200 in January 2026
• More than 97% of U.S. companies that import goods are small businesses, according to the U.S. Chamber of Commerce

The February 2026 Supreme Court ruling that the International Emergency Economic Powers Act (IEEPA) doesn't authorize presidential tariffs offered a brief moment of hope. But the administration quickly pivoted to Section 122 of the Trade Act of 1974, which allows tariffs of up to 15% on all imported goods for 150 days. For small businesses that reorganized supply chains around the possibility of relief, this was a gut punch.

Making matters worse: refunds for tariffs ruled illegal under IEEPA have not been issued more than a month after the Supreme Court decision. Cash that small businesses paid in good faith remains locked up in government accounts.

The Oil Price Shock

Three weeks into the Iran conflict, Brent crude hit $119 per barrel before retreating slightly. With 20% of the world's oil supply flowing through the Strait of Hormuz, the risk premium isn't going away soon.

The impact cascades through every small business that moves goods:

• Travis Maderia, a lobster fisherman and cofounder of Lobster Boys, reported that gas prices increased 60 cents per liter for his fleet. His cost per pound of lobster jumped from the typical $13-$14 range to $17 — a 25% increase in input costs that he can't fully pass to customers without losing them.

• Shipping costs are spiking across industries as fuel surcharges rise and transit routes lengthen to avoid conflict zones.

• Brett Massimino, a supply chain professor at Virginia Commonwealth University, warned that "small businesses don't have the margins or reserves to absorb cost increases" and face difficult choices between expediting delayed shipments or managing shortages.

The Two-Front Squeeze

What makes this moment particularly dangerous for small businesses is the combination:

1. Tariffs raise the cost of goods before they arrive. A product that cost $10 to import in 2024 might now cost $11.50 after tariffs — a 15% hit before the business even adds its margin.

2. Oil prices raise the cost of moving those goods. Shipping, delivery, and logistics costs are climbing at the same time input costs are elevated.

3. Customers are price-sensitive. The same economic pressures hitting businesses are hitting consumers. Passing costs through is harder when your customers are also tightening budgets.

The result is a margin compression that large corporations — with their scale, negotiating power, and legal teams — can weather far better than a 20-person operation.

What Small Businesses Can Do

Immediate actions

Audit your tariff exposure. Know exactly which of your imported products are subject to tariffs and at what rate. Many businesses are paying tariffs they could reduce through reclassification, exclusion requests, or supplier changes.

Renegotiate with suppliers. If your suppliers are also feeling the squeeze, there may be room to restructure contracts — longer terms in exchange for price stability, or shifting to domestic alternatives for specific components.

Model the scenarios. Don't wait to find out what $130 oil or 20% tariffs would do to your margins. Run the numbers now. Build a cash flow forecast that accounts for the realistic range of outcomes over the next 6 months.

Strategic adjustments

Diversify your supply chain. If you're heavily dependent on imports from tariff-affected countries, start identifying alternatives. This takes time — start now, not when the next round of tariffs hits.

Build a cash reserve. Experts warn that the most acute effects of the Iran conflict could intensify within two months as businesses exhaust reserves or renew contracts at higher prices. If you have the ability to build a buffer, now is the time.

Get granular on pricing. Not every product or service needs the same margin. Identify where you can absorb cost increases and where you need to pass them through. Customers are more accepting of targeted price increases on specific items than across-the-board hikes.

The Bigger Picture

The combination of tariff policy and geopolitical conflict is creating an environment where financial visibility isn't optional — it's survival. Small businesses that understand their cost structure, cash position, and runway in detail are the ones that navigate these crises. Those operating on gut instinct and quarterly P&L reviews are the ones that get surprised.

The tariff landscape may shift again. Oil prices will fluctuate. But the need for real-time financial intelligence — knowing exactly where you stand and what's coming — is only getting more urgent.