Renewed US-Iran Conflict: How the Strait of Hormuz Blockade Disrupts the Polyester Chain

International oil prices surged nearly 3% between July 8 and 12, with U.S. crude briefly returning to the $80 range, driven by the re-blockade of the Strait of Hormuz. This geopolitical event directly ignited short-term volatility in the polyester chain, causing polyester filament yarn prices to rebound sharply after a period of decline, with some polyester factories even raising prices twice in a single day.

For the textile industry, this is not an isolated incident. Memories of the raw material surge earlier this year remain fresh, and current inventory levels among weaving mills are generally low. Panic quickly translated into procurement action. On July 8, the average sales-to-output ratio for polyester filament yarn soared to 361.9%, with the weekly average reaching 132.7%, reflecting downstream risk aversion amid uncertainty.

Background

The trigger for this conflict was Iran's plan to charge fees for ships passing through the Strait of Hormuz, which the U.S. rejected, leading to clashes. The U.S. Central Command announced strikes on Iran on July 8, and an Iranian naval officer was killed, prompting the re-closure of the strait. A previous memorandum of understanding between the two sides lasted only a few months before being torn up.

Unlike the initial blockade earlier this year, a large number of oil tankers had already exited the strait before this closure, easing global supply concerns and preventing oil prices from spiking to $100. The market generally believes the blockade will not persist, but a geopolitical risk premium has already been priced in.

Industry Impact

Supply-side contraction on the polyester end supports the price rebound. Current capacity utilization for polyester filament yarn stands at only 74.6%, well below last year's levels, with frequent maintenance shutdowns for upstream PTA and PX. This tight supply props up raw material prices. However, downstream weaving mills face a dilemma: orders are scarce during the off-season, and building inventory risks locking up capital, but without stock, they may miss cost advantages if prices continue to rise.

The recent surge in sales is driven more by panic buying than genuine demand recovery. End-market demand has not shown clear signs of improvement. Textile companies, battered by volatile raw material prices in the first half of the year, are now taking a cautious approach. In the short term, the downward trend for polyester filament yarn has been reversed, and prices are likely to remain firm, but sustainability depends on whether the conflict escalates further.

Practical Advice

For Buyers - Consider modestly replenishing raw material inventory in the short term, but avoid overstocking to guard against a potential price correction if tensions ease. - Monitor U.S.-Iran negotiation progress and Strait of Hormuz navigation status; geopolitical events often have a pulse-like impact. - Use futures instruments to lock in some forward raw material costs and hedge against price volatility.

For Weaving Mills - Adopt a make-to-order approach during the off-season to avoid accumulating finished goods inventory and tying up capital. - Negotiate short-term supply agreements with polyester factories to secure stable supply during rapid price increases. - Strengthen end-order tracking; if downstream customers accept price hikes, pass on costs moderately; if orders remain weak, control operating rates.