The renewed US-Iran military confrontation has once again blocked the Strait of Hormuz, driving international oil prices higher and triggering immediate turmoil in the polyester supply chain. After a period of continuous decline, polyester filament yarn prices rebounded sharply, forcing downstream textile mills into panic buying mode.
Event Background and Market Response
According to public reports, on July 8, US Central Command launched a series of strikes against Iran in response to Iranian attacks on commercial shipping in international waterways. Iran confirmed the death of a naval officer in the strikes, leading to the re-closure of the Strait of Hormuz. This geopolitical event quickly transmitted to commodity markets, with WTI crude oil briefly returning to the $80 range, and a nearly 3% single-day gain on July 12.
The polyester chain reacted even more dramatically. On July 8, polyester filament yarn prices rebounded, with some polyester plants raising prices twice in one day, reversing the previous downward trend. Downstream textile mills acted swiftly—on July 8, the average sales-to-production ratio for polyester filament yarn surged to 361.9%, with the weekly average reaching 132.7%. These figures, far above normal levels, indicate a shift from wait-and-see to panic buying.
Industry Impact: Widening Supply-Demand Divergence
The polyester rebound is not solely driven by crude oil sentiment. Current polyester filament yarn capacity utilization stands at just 74.6%, well below last year's levels. Upstream PTA and PX maintenance is frequent, providing fundamental support for raw material prices. This production-cut narrative strengthens market expectations of further price increases and gives polyester plants confidence to raise prices.
However, downstream weaving mills face a more difficult situation. It is currently the traditional off-season, with limited final orders. Running machines to build inventory risks losses if raw material prices fall or demand remains weak; but not running risks missing out on further price increases, leading to higher future production costs. The volatile raw material prices in the first half of the year have already exhausted weaving mills, forcing them to adopt a cautious, step-by-step approach.
Sales data suggests that this surge is more panic-driven than demand-driven. No clear signs of recovery in end-user apparel and home textile markets have emerged. Once geopolitical tensions ease, raw material prices may face downward pressure.
Outlook: Low Probability of Oil Returning to $100
After months of back-and-forth, the market is familiar with the pattern of "fight and talk" between the US and Iran. The current conflict was triggered by Iran's attempt to charge fees for Strait of Hormuz shipping, which the US found unacceptable and responded with military action. Although the conflict has escalated, a large number of oil tankers had already exited the strait before the blockade, providing a buffer for global crude supply. As a result, oil prices have not surged to $100 as they did previously.
The market generally believes the blockade is unlikely to last long. The previously signed memorandum of understanding has been torn up, but negotiation channels are not completely closed. In the long term, oil price trends depend on whether the conflict escalates further, rather than the current blockade itself. For the textile industry, the short-term downward trend in polyester filament yarn has been reversed, and prices are expected to remain firm in the coming period. However, the real determinant of sustainability remains whether downstream demand improves after the off-season.