Inflation may be easing, but that doesn’t mean small business owners can relax. Rising geopolitical tensions, volatile oil prices, uncertain interest rates, and shifting currency markets are creating new challenges for entrepreneurs. To help make sense of today’s economic landscape, I spoke with three experts from Convera, a global financial risk management company, about what small business owners should be watching for—and the practical steps they can take to protect their businesses in the months ahead.
Markets React to a Changing Economic Landscape
Rieva Lesonsky: Inflation cooled more than expected in June, but rising tensions in the Middle East have quickly shifted the conversation. How are financial markets reacting to this combination of good inflation news and growing geopolitical uncertainty?
Kevin Ford, FX and Macro Strategist: U.S. inflation came in below forecast in June, giving markets some relief after the latest jump in geopolitical risk. Headline CPI fell 0.4% on the month, compared with expectations for a 0.1% decline. The annual rate slowed to 3.5% from 4.2%, also below the 3.8% consensus. Core CPI was flat on the month, missing the 0.2% estimate. The annual core rate eased to 2.6% from 2.9%, undershooting expectations for 2.8%.
Energy did most of the work in pulling the headline figure lower. The energy index fell 5.7% in June, led by a 9.7% drop in gasoline prices. That more than offset firmer food prices, which rose 0.2% on the month. Shelter inflation also cooled, rising just 0.1%, the smallest monthly gain since January 2021. The softer shelter print will be welcome at the Fed, given how sticky that category has been.
The report helps calm worries that the oil shock from U.S.-Iran tensions could quickly feed into a broader inflation rebound. Core goods slipped 0.1%, while services excluding energy were flat. Motor vehicle insurance, apparel, communication, medical care, and used cars all declined on the month. That mix points to softer underlying price pressure, not just a one-off energy move. Traders will now turn to Kevin Warsh’s first appearance before Congress as Fed chairman for any clues on the rate path.
Markets reacted quickly to the downside CPI surprise. The two-year Treasury yield fell 10 basis points on the day to 4.18%. The U.S. dollar also moved lower as rate-hike concerns eased. Stocks rose as investors marked down the risk of a more hawkish Fed response. The data does not settle the policy debate, but it gives markets a cleaner reason to lean risk-on for now.
Lesonsky: Oil prices are often the first concern when conflict escalates. Beyond higher fuel costs, what ripple effects could small businesses see if tensions between the U.S. and Iran continue?
Antonio Ruggiero, Senior FX Strategist: The sharp re-escalation in the Middle East has materially altered the inflation backdrop. Not only does this impact oil prices, but it also disrupts the flow of cargo through the Strait of Hormuz. Additionally, the U.S. is reportedly considering renewed maritime restrictions alongside a proposed 20% protection fee on cargo transiting the strait. Taken together, these developments point to renewed upside risks for inflation.
Why It Matters to Small Businesses
Lesonsky: Many small businesses don’t think of themselves as being affected by currency markets. How can fluctuations in the U.S. dollar impact even businesses that primarily operate domestically?
Guru Sankaranarayanan, General Manager, Small Business Segment: Many small businesses think foreign exchange is only relevant if they’re importing or exporting, but in today’s interconnected economy, currency movements can influence everything from supplier costs to consumer demand. The exposure is often indirect, but it’s very real.
- No business is completely insulated from currency markets. Even if a company only serves domestic customers, many of the products, materials, software, equipment, and services it buys have global supply chains behind them.
- A stronger or weaker U.S. dollar can directly affect costs. If the dollar weakens, imported inputs such as electronics, machinery, packaging, raw materials, or components often become more expensive, putting pressure on margins.
- Currency fluctuations can show up as inflation at the business level. Small businesses may see higher supplier prices, increased shipping costs, or rising technology expenses without immediately realizing exchange rates are a contributing factor.
- Even service-based businesses can feel the effects. Many rely on internationally priced software subscriptions, cloud services, advertising platforms, or contractors, whose costs can fluctuate with currency markets.
- Consumer spending can be affected — making it harder to forecast. Exchange rate movements influence the broader economy, inflation, and interest rate expectations, which can impact how much customers are willing to spend.
- Tourism and local demand can shift with the dollar. In areas that attract international visitors, a weaker dollar can make the U.S. more affordable for foreign travelers, while a stronger dollar can have the opposite effect.
- Competition is influenced by exchange rates as well. Currency movements can make foreign competitors more or less price-competitive, affecting domestic businesses even when they don’t import or export directly.
- The key takeaway is that currency risk is often hidden. Small businesses may not see a foreign exchange transaction on their bank statement, but exchange rate movements can still affect their costs, customers, suppliers, and profitability.
Lesonsky: How are importers and exporters adjusting their strategies in response to today’s uncertainty?
Sankaranarayanan: In today’s environment, successful importers and exporters are spending less time trying to predict uncertainty and more time building resilience. The focus is on flexibility, diversification, and creating greater visibility into costs and cash flow.
- Many importers and exporters are prioritizing flexibility over forecasting. Rather than trying to predict where currencies, tariffs, or trade policies will move next, they’re building contingency plans for multiple scenarios and have clear risk management strategies for their FX exposure
- Businesses are shortening planning cycles. Companies that previously locked in purchasing or pricing decisions months in advance are reviewing them more frequently as market conditions change.
- Importers are looking for greater supply chain diversification. Many are exploring alternative suppliers, sourcing locations, or transportation routes to reduce dependence on any single market.
- Exporters are paying closer attention to pricing strategy. Currency movements can quickly affect competitiveness, so businesses are reassessing how often they update prices and margins.
- Inventory management has become more strategic. Some businesses are increasing inventory ahead of anticipated disruptions, while others are focusing on leaner inventories to avoid tying up capital in uncertain markets.
- Cash flow and working capital are getting increased attention. Uncertainty around exchange rates, supply costs, or customer demand makes financial resilience a top priority for many small and medium-sized businesses.
- Technology and data are playing a bigger role. Businesses are increasingly relying on real-time visibility into suppliers, costs, and market conditions to make faster decisions.
Considering the above factors, we are seeing more companies using financial tools like hedging to manage risk. Hedging strategies, forward contracts, and other treasury solutions can help provide greater cost certainty in volatile environments.
Preparing for What’s Ahead
Lesonsky: If oil prices remain elevated for an extended period, which industries are likely to feel the greatest pressure first?
Sankaranarayanan: When oil prices remain elevated, the pressure typically shows up first in transportation and logistics, but it doesn’t stop there. Higher fuel costs ripple through supply chains, affecting manufacturers, retailers, agriculture, construction, and ultimately any business that depends on moving goods or serving cost-conscious consumers.
Lesonsky: Many business owners are hoping the Federal Reserve will begin lowering interest rates. Could renewed inflation pressure from energy prices delay those plans?
Ruggiero: We believe the broader hawkish narrative remains intact. Notably, market pricing for one additional Fed hike this year remains broadly unchanged, suggesting investors continue to view the geopolitical re-escalation as a meaningful counterweight to the recent disinflationary trend.
Lesonsky: What are you hearing from your clients about the biggest financial risks they’re preparing for over the next six to 12 months?
Sankaranarayanan: When we speak with clients, the common thread is a desire for greater certainty. Whether it’s currency volatility, supply chain costs, customer demand, or interest rates, businesses are focused on protecting cash flow and margins while maintaining the flexibility to adapt as conditions change.
- Margin pressure remains the number one concern. Businesses are preparing for the possibility of higher input costs, whether driven by tariffs, currency volatility, supply chain disruption, or inflationary pressures. Pricing strategy in this environment is difficult.
- Cash flow is back in focus. Many companies are stress-testing their working capital needs and ensuring they have sufficient liquidity to manage unexpected swings in costs, demand, or payment cycles. Interest rates and financing costs continue to be closely watched. Businesses with borrowing needs are focused on preserving financial flexibility and managing debt costs effectively.
- Customer demand uncertainty is another key risk. Businesses are preparing for slower spending patterns from both consumers and corporate buyers if economic conditions soften.
- Supply chain resilience remains a priority. Even businesses that have diversified suppliers are looking for additional ways to reduce disruption risk and improve visibility into costs.
Currency volatility is hence a growing concern. Importers are worried about rising costs, while exporters are monitoring how exchange rate movements could affect competitiveness and profitability.
Lesonsky: For small businesses that buy products or materials overseas, what practical steps can they take now to reduce the impact of currency volatility and rising costs?
Sankaranarayanan: The most resilient small businesses are shortening their planning cycles, strengthening supply chain flexibility, and taking a proactive approach to FX risk management. Greater visibility into future costs helps them make better pricing decisions, protect profitability, and navigate uncertainty with more confidence
Lesonsky: We’ve talked a lot about the risks. Are there opportunities that businesses should be watching for during periods of market uncertainty?
Sankaranarayanan: While uncertainty creates risks, it also creates opportunity. Businesses that stay agile can gain market share, strengthen customer relationships, and uncover new growth opportunities as competitors pull back. Companies that actively manage costs, cash flow, and currency risk are often better positioned to invest with confidence, protect margins, and emerge stronger when conditions stabilize.
- Market disruption can open new customer opportunities. When competitors struggle with pricing, inventory, or service levels, businesses that can maintain reliability often strengthen customer relationships and win new accounts.
- Volatility can strengthen competitive positioning. Businesses with strong cash flow, resilient supply chains, and disciplined financial planning are often able to invest, expand, or acquire customers when others pull back.
- Currency movements can create growth opportunities. A weaker domestic currency can make exporters more competitive internationally, helping them win new business in overseas markets.
- Supplier relationships can become a source of advantage. Companies that engage proactively with suppliers on pricing, inventory, and payment terms can often secure more favorable arrangements during uncertain periods.
The Economic Indicators to Watch
Lesonsky: Looking ahead, what economic indicators should small business owners pay the closest attention to over the rest of the year?
Ford: Small business owners should watch inflation, rates, and trade/energy costs over the rest of the year. Inflation is still the first-order issue because it affects input costs, wages, pricing power, and borrowing costs. In the U.S., small businesses still cite inflation as their top problem, while in Canada, CFIB data show price plans remain elevated, and fuel, tax/regulatory, and wage costs are still major constraints.
The second indicator is interest rates and credit conditions. Even if central banks are on hold, the rates that businesses actually pay can still move with bond yields, risk premiums, and lender caution, which matters for equipment purchases, refinancing, inventory, and expansion plans.
Third, owners should watch customer demand and hiring trends. In Canada, insufficient demand is the most commonly cited constraint among SMEs, while in the U.S., small-business optimism has improved but high rates and modest growth are still keeping owners cautious on hiring and capital spending.
Finally, energy prices and trade policy will be key for the remainder of 2026. Energy shocks feed directly into fuel, freight, plastics, packaging, and operating costs, while trade uncertainty can delay investment decisions even before tariffs actually change.
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.