Every ripple in the Strait of Hormuz sends shockwaves through the global textile industry. On July 8, the US military launched a fresh round of strikes against Iran, prompting Tehran to re-blockade the strategic waterway. International oil prices surged, with WTI crude briefly returning to the $80/barrel range and posting a near-3% gain on July 12. For China's textile sector, still reeling from severe raw material price volatility in the first half of the year, this marks another critical test.
Panic Buying Grips the Polyester Market
The geopolitical escalation quickly cascaded down China's polyester chain. Polyester filament yarn (PFY) prices, which had been in a prolonged slump with frequent factory promotions, reversed sharply from July 8 onward. Some polyester producers even raised prices twice in a single day, fully reversing the earlier downtrend. Downstream weaving mills reacted swiftly: on July 8 alone, the average sales-to-production ratio for PFY soared to 361.9%, with the weekly average reaching 132.7%—far above normal industry levels.
This buying frenzy was not driven by genuine improvement in end-user orders. The painful memory of raw material spikes early this year, combined with low current inventory levels among many textile firms, fueled fears that oil could return to $100/barrel. Panic prevailed, and stockpiling became widespread even during the traditional off-season.
Supply Constraints Underpin the Rally
The price rebound is not purely sentiment-driven. Supply-side contraction within the polyester chain provides fundamental support. Current PFY capacity utilization stands at just 74.6%, well below year-ago levels. Frequent maintenance shutdowns at upstream PTA and PX plants have tightened feedstock supply, reinforcing polyester producers' pricing power. The combination of output cuts and geopolitical risk makes short-term prices more resilient.
However, downstream weavers face a dilemma. With weak seasonal orders and high finished-goods inventory risk, ramping up production could lead to unsold stock, while halting operations risks missing further raw material price gains. Having endured wild price swings in the first half of 2026, many mills now navigate cautiously, uncertain of the next move.
Can Oil Return to $100?
Historically, US-Iran conflicts follow a pattern of periodic escalation and de-escalation. The current trigger—Iran's attempt to levy tolls on Strait of Hormuz transits, which the US rejected—led to skirmishes that escalated into full blockade. The previous memorandum of understanding lasted only a few months before being scrapped, suggesting that a durable agreement remains elusive.
Notably, a large number of oil tankers had cleared the strait before the blockade, cushioning the immediate supply shock. Consequently, oil prices have not spiked to $100/barrel as they did earlier this year. Market consensus holds that the blockade is unlikely to persist long-term, limiting further upside. The trajectory hinges on whether military action intensifies and on diplomatic efforts to resolve the standoff.