TLDR
- The Iran war is raising energy and commodity costs, squeezing margins for McDonald’s (MCD) and Restaurant Brands International (QSR)
- Low-income consumers are being hit hardest as higher gas prices cut into discretionary spending on food away from home
- Supply chains in Asia are “spotty,” with logistics costs rising for both chains
- Bernstein reiterated a Market Perform rating on MCD with a $340 price target, implying around 10% upside from current levels
- Neither company has reported any anti-American sentiment tied to the conflict so far
The Iran war is starting to show up in the numbers — and the outlook — for two of the world’s biggest fast-food chains.
Bernstein held meetings with management at McDonald’s and Restaurant Brands International (QSR) this week, walking away with a clear message: the conflict is creating pressure on both the demand and supply side of the restaurant business.
Neither chain is facing a crisis. But conditions are getting tighter, and the second half of 2026 could be harder if energy prices stay elevated.
McDonald’s has hedging programs in place to limit near-term exposure to energy and commodity swings. That’s helping corporate-owned stores and franchisees absorb some of the current spike.
The problem is those hedges don’t last forever. If prices stay high, they’ll roll over at higher market rates — and that cost lands squarely on franchisee margins.
That matters because franchisees fund store renovations and digital upgrades. If the middle of the P&L keeps getting squeezed, those investment plans could slow down.
Low-Income Consumers Pulling Back
The gas pump effect is real. Low-income consumers spend a bigger portion of their income on fuel, so when gas prices rise sharply, it acts like a direct tax on eating out.
This demographic has historically been the floor of fast-food demand. Both MCD and QSR have leaned into value messaging to keep that floor intact, but it’s showing cracks, particularly in international markets.
High-frequency data from early March points to a slowdown in consumer spending. Weather events in the U.S. are also clouding first-quarter results, making it harder to read underlying trends.
Bernstein flagged that brands with heavier exposure to the Northeast U.S. and Canada may face additional pressure, given the back-to-back negative events in those regions.
Asia Supply Chains Under Strain
On the supply side, Asia is the clearest pressure point. Both companies flagged “spotty” supply chains and rising logistics costs across the region.
For RBI — the parent of Burger King, Popeyes, and Tim Hortons — the challenge is keeping value messaging consistent while local operators deal with rising overhead costs.
McDonald’s has roughly 5% of its stores in the Middle East. That region faced real headwinds from anti-American sentiment in 2023 and 2024. So far, neither company has seen that dynamic return with the Iran conflict.
That’s a meaningful difference from prior geopolitical flare-ups and one less risk to price in right now.
Bernstein maintained its Market Perform rating and $340 price target on MCD. At $308.93, that leaves about 10% upside to the target, though InvestingPro data flags the stock as overvalued relative to its Fair Value estimate.
McDonald’s has raised its dividend for 50 consecutive years. It currently yields 2.41%.
The company is also planning new value deals for April, including items priced at $3 and under, along with $4 breakfast meal deals.
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