As the escalating conflict involving Iran spreads through global markets, early signs of strain are emerging across industries. Throughout the Gulf, conditions remain uneven – with some companies scaling back operations while others continue largely uninterrupted. Retailers are monitoring rising tensions and assessing potential effects on global supply chains and import volumes, even as analysts caution that it is too early to gauge the extent of any impact. That caution is already being reflected in corporate commentary: Ulta Beauty CEO Kecia Steelman, for one, said on a recent earnings call that the company is “increasingly mindful of rising global conflicts that could impact economic conditions.”
The effects of the conflict, which has intensified in recent weeks, extend well beyond the Gulf. Rising energy prices, uncertainty around key trade routes, and tighter supplies are beginning to reshape cost structures across industries. These pressures can build quickly across manufacturing and transportation networks. Because they are largely outside management’s control, they also make it harder to separate external headwinds from company-specific underperformance.
From External Pressures to Investor Scrutiny
However, that distinction does not insulate companies from scrutiny. If anything, periods of instability tend to bring underlying weaknesses into view. Issues that may have been easier to overlook in stronger markets – from inventory missteps to slower digital execution – become more apparent when conditions deteriorate, particularly as companies respond unevenly to rising costs and shifting demand.
As Kai H.E. Liekefett and Derek Zaba of Sidley Austin LLP noted, market dislocations – or periods when stock prices move out of step with how companies are actually performing – “often expose gaps between [a company’s[ stock price and [its] intrinsic value.”
For fashion and retail companies, those gaps can emerge quickly. Global brands depend heavily on cross-border manufacturing networks and international tourism — both highly sensitive to geopolitical disruption. At the same time, the sector is already operating in a competitive environment shaped by shifting consumer demand, rising input costs, and evolving digital strategies. Luxury groups, in particular, remain exposed to global travel flows, a key driver of high-margin sales that can weaken quickly in times of crisis.
When these pressures converge, investors often begin asking harder questions: Are brands allocating capital efficiently? Is management responding effectively to disruptions in manufacturing and logistics? Are digital and direct-to-consumer strategies keeping pace with shifting consumer behavior? And perhaps most importantly, is the board providing adequate oversight during a period of instability?
This is where volatility starts to shift into governance scrutiny – and where activist investors may begin to see an opening.
Governance and Disclosure Risks
Periods of geopolitical instability tend to bring board oversight into focus. Investors often look more closely at whether directors understood the company’s exposure to supply chains, costs, and demand – and how effectively management responded. When performance deteriorates, the question for investors is not simply what happened, but whether the board anticipated and responded appropriately. If not, operational challenges can quickly be reframed as governance failures.
Disclosure plays a parallel role. In periods of uncertainty, investors rely heavily on companies’ descriptions of risk exposure, operational impact, and forward guidance. Where disclosures fall short (whether by omission, delay, or lack of clarity), activists may argue that management has failed to provide an accurate picture of the business. Together, governance and disclosure can become central elements of activist campaigns, particularly in volatile periods when performance, alone, does not tell the full story.
Volatility can also create a more practical advantage. As Liekefett and Zaba put it, “If the Iran conflict stabilizes – or markets acclimate to the new risk premium – activists may reemerge with renewed intensity,” armed with equity stakes acquired at lower prices, sharper arguments regarding relative performance, and/or fresh critiques of crisis management and risk oversight.”
THE TAKEAWAY: For retail brands operating in an increasingly unstable global environment, geopolitical shocks do more than disrupt logistics or retail traffic. They reset expectations around performance and, in doing so, reshape how investors judge management. Periods of volatility rarely produce immediate activist campaigns. However, they can create the conditions for them by widening valuation gaps, exposing clearer relative underperformance, and raising questions about oversight and strategy. By the time markets stabilize, those dynamics are no longer abstract; they become a playbook for activists.
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