High-street retailer Next has reported a £15 million increase in costs due to the Iran conflict and has warned it may be forced to hike prices if the war continues. The beloved fashion chain said it had set aside the cash for additional costs for fuel and air freight due to shipping disruption and soaring oil prices, but that the impact so far can be offset by savings elsewhere in the business.

It cautioned the conflict in the Middle East – a region which accounts for around 6% of its annual sales – was holding back growth in those countries, and is also likely to impact costs, selling prices and consumer demand across the wider group. Next’s chief executive, Lord Simon Wolfson, says the company is currently planning on the conflict lasting three months but emphasized that if it continues longer, “we will start passing costs on through higher prices.” He added that, for now, this is a contingency rather than a confirmed plan.

It comes as Next reported better-than-expected annual profits, up 14.5% at £1.16 billion on a pro forma 52-week basis and hiked its guidance for the year ahead to £1.21 billion, though this is based on the Iran war being resolved before the summer.