Toyota has reported a £3bn hit from costs from the war in Iran, as prices of parts and materials soared and sales dropped.

The world’s biggest carmaker said profits declined in its financial year to March as it was “likely unable to absorb newly added impact from the Middle East”, in one of the largest warnings yet of the war’s impact on businesses.

The biggest hit for the Japanese manufacturer was a 400bn yen (£1.9bn) increase in materials costs linked to the war, while it lost another 270bn yen in lower sales. Toyota is the dominant automotive brand in the Middle East.

Toyota’s operating profits dropped to 3.8tn yen for the year to March, with Donald Trump’s tariffs costing it 1.38tn yen.

The US-Israeli attacks on Iran, and the consequent closure of the strait of Hormuz, have roiled global industry. Trump, under political pressure because of higher gasoline prices in the US, has said a deal to reopen the strait is on the table, but Iranian officials have so far given no indication that they are minded to accept.

Asian manufacturers have been particularly affected by the turmoil because of a heavier reliance on exports from the Gulf, many of which have been trapped since the start of the war. For instance, Japan’s automotive industry lobby group has said 70% of the country’s aluminium imports come from the Middle East. Oil prices have also increased the cost of tyres.

Toyota said its profits for the year to March 2027 would decline for the third year in a row because of the war’s impact. It expected operating income for the coming year would be 3tn yen (£14bn), a drop of more than a quarter.

Takanori Azuma, Toyota’s chief accounting officer, said: “We do not believe we can fully offset negative 670bn yen Middle East impact.”

The impact of the Iran war is being felt in everything from “fuel costs, transportation expenses, and the cost of paint and other materials used at vehicle assembly plants”, Azuma said, according to Reuters.

Toyota sold 9.6m cars during the year, half of them hybrid cars that combine a petrol engine with a small battery. Its global sales rose 2% during the year, helped by 9% growth in North America.

Toyota has focused its electrification efforts on hybrids, despite their higher pollution in a successful bet on a slower transition away from fossil fuels than rivals expected. It only sold 600,000 battery cars during the year, although that was more than double the year before.