The Strait of Hormuz, which carries roughly one-fifth of global oil trade, is now seeing its transit order directly rewritten by regional conflict. On August 19, the UAE suspended all trade and financial ties with Iran, following alerts of two ballistic missiles entering its territorial waters. For the textile industry, this is not just geopolitical news but a signal that trade in fabrics, yarns, and garments routed through or destined for the Middle East will face dual pressures of higher logistics costs and settlement uncertainty.
Background
On August 18, the UAE Defense Ministry monitored two ballistic missiles, one landing outside territorial waters and another inside its territorial sea, prompting a high state of alert. Earlier, two oil tankers of Abu Dhabi National Oil Company had been attacked in the Strait of Hormuz, and several shipping companies reported transit hazards. The UAE's suspension of trade, commercial, and financial transactions with Iran, with no set resumption date, has directly severed the long-established flow of goods and funds between the two countries.
The transit status of the Strait of Hormuz affects the global energy supply chain, as large volumes of crude oil and refined products rely on this waterway. Current shipping order has been visibly disrupted, with some shipowners choosing to reroute or delay transit, while insurance costs rise. This means that even if textile cargo does not directly pass through the strait, upstream chemical fiber raw materials—such as PTA and polyester filament—will see cost and schedule impacts transmitted through energy prices and vessel schedules.
Industry Impact
For textile foreign trade enterprises, the most immediate impacts come from logistics and settlement. The trade suspension between the UAE and Iran means textiles and home textiles that were previously transshipped via Dubai cannot enter the Iranian market, and shipped goods face the risk of detention or return. Meanwhile, financial transaction suspensions render letters of credit and wire transfers ineffective, significantly increasing uncertainty in payment cycles.
Rising shipping risks have deeper chain effects. Disruption in the Strait of Hormuz will push up overall freight rates on Asia-Europe routes and extend delivery times. For textile exporters relying on Middle East routes, especially suppliers of home textiles and garments to Iran, Iraq, and Gulf states, this means freight and insurance costs in quotes need recalculation, or profits will be eroded. Additionally, energy price fluctuations directly affect chemical fiber production costs; PTA and MEG prices may rise with oil, squeezing fabric mill margins.
Market analysts point out that the future trajectory depends on whether diplomatic consultations can resume. A memorandum of understanding in June planned for 60-day negotiations, but differences stalled progress. Iran has signaled that the strait will only reopen after its demands—including lifting port blockades, oil restrictions, and military de-escalation—are met. This suggests no near-term recovery in transit, and textile enterprises should prepare risk plans for at least one quarter.