Core Insights - A prolonged Middle East conflict is expected to impact various European sectors differently, with metals and mining, airlines, chemicals, and parts of industrials identified as the most vulnerable to supply chain disruptions and increased input costs [1] Metals and Mining - Metals and mining is highlighted as a significant pressure point, with 9-10% of global aluminium production located in the Gulf region, leading to potential long-lasting supply shocks if smelters shut down [4] - The Middle East contributes approximately 25-33% of the supply of sulphur for copper and nickel refining, raising concerns about supply stability [4] Airlines - Airlines are particularly vulnerable due to jet fuel prices, with analysts indicating that sustained high fuel prices would make it challenging for carriers to protect their margins [5] - While ticket prices typically rise with fuel costs, airlines may struggle to fully pass on these increases due to supply constraints limiting their pricing power [5] Chemicals - Spot prices for chemicals in Asia have surged by about 15% week on week, driven by rising oil and gas prices, although major shortages are not anticipated in the near term due to existing inventories [6] - Fertilizers are flagged as an inflation risk, with the Middle East accounting for roughly 35% of seaborne urea trade, impacting companies like CF Industries and Mosaic Co, which saw stock increases of over 5.5% [6] Industrials - The electrical equipment sector faces vulnerabilities due to reliance on key materials such as copper and aluminium, with potential growth concerns arising from supply risks amid increasing demand driven by AI and datacentre investments [7] - In the automotive sector, higher raw material and energy costs are identified as the main risks, although the direct impact from reduced car demand in the Middle East is expected to be limited [7]