Japan’s Toyota Motor Corporation has projected a financial impact of approximately $4.3 billion for the current fiscal year due to the ongoing conflict in Iran, marking one of the most significant corporate warnings related to the broader economic fallout from the war. The world’s largest automaker disclosed on Friday a nearly 50 percent decline in its quarterly operating profit, falling to 569.4 billion yen ($3.9 billion) for the three months ending March 31, compared to 1.1 trillion yen in the same period last year.

Toyota anticipates a 20 percent reduction in full-year profit, a downturn attributed primarily to escalating costs linked to the conflict. Of the estimated 670 billion yen ($4.3 billion) impact, the majority is expected to stem from increased material expenses, with the remainder resulting from delivery delays and diminished sales volumes. Company executives highlighted that rising fuel prices, as well as higher transportation and raw material costs—such as paint and other components used in vehicle assembly—are reverberating throughout its supply chain.

Despite the financial pressures, Toyota reported strong demand for its hybrid vehicles, forecasting sales to surpass five million units this year for the first time. The surge in energy prices stemming from the Iran war has steered consumers toward more fuel-efficient models. However, this increased demand has not fully compensated for the additional expenses and operational challenges caused by the conflict.

Toyota’s $4.3 billion estimate of the Iran war’s business impact exceeds similar assessments released by other major corporations, including airlines and industrial firms, underlining the unique pressures faced by the automaker. Additionally, Toyota is absorbing some cost increases incurred by its group suppliers, further amplifying financial strain.

These developments come amid a complex global economic environment where geopolitical instability is influencing commodity prices and disrupting international supply chains. As Toyota navigates these headwinds, its financial results underscore the broader challenges confronting multinational manufacturers tied to volatile regions and energy markets.