Strait of Hormuz Risks Escalate, Pressuring Textile Trade Supply Chains

The Strait of Hormuz, which carries about one-third of global LNG and over one-fifth of oil trade, is now facing direct disruption. For the textile industry, this means import costs and delivery times for petrochemical-based raw materials like polyester and nylon will fluctuate, while export orders to the Middle East face higher fulfillment uncertainty.

Event Background

On August 19, the UAE announced a suspension of all trade, commercial, and financial transactions with Iran, with no resumption date set. A day earlier, the UAE Defense Ministry detected two ballistic missiles, one falling outside its territorial waters and the other within, raising security alerts. Earlier, two tankers of the Abu Dhabi National Oil Company were attacked in the Strait, highlighting that threats to civilian vessels have become a regular risk rather than an isolated incident.

Diplomatic efforts have also stalled. In June, parties reached a memorandum of understanding to start negotiations on multiple issues within up to 60 days, hoping to ease tensions and restore navigation. But differences widened, and talks have stalled. Iran has stated that the strait will only reopen when its demands—including lifting port blockades, oil restrictions, asset freezes, and halting military confrontation—are met. This suggests that near-term restoration of navigation is unlikely, and shipping order cannot self-heal.

Industry Impact

For the textile supply chain, the spillover first hits raw materials. China imports large volumes of petrochemical products from Middle Eastern countries like Iran and Saudi Arabia, notably PX, the core feedstock for polyester. Disruption or rerouting in the strait will directly increase price volatility for PX and downstream PTA and polyester filament. Companies holding large raw material inventories may face cost pressures, while those relying on just-in-time purchases risk supply interruptions.

On the export side, the Middle East is an important re-export market for home textiles and garments, with Dubai serving as a regional distribution hub. The UAE-Iran trade suspension not only blocks direct goods flows but also affects textile exports transiting through Iran to neighboring countries. Rising shipping insurance costs have led some carriers to add surcharges for routes via Hormuz or suggest rerouting via the Cape of Good Hope, extending delivery times by 7-14 days and increasing capital occupation and default risks.

For buyers, the current situation requires reassessing risks when sourcing from the region or shipping to it. It is advisable to include force majeure and logistics change clauses in contracts and prioritize suppliers with alternative transport options. For trading companies with Middle East business, closely monitor diplomatic progress—if confrontation persists, regional trade and global energy supply chains will remain volatile, affecting the textile industry's overall cost structure.

Practical Recommendations

For Buyers - Assess current raw material inventory coverage and lock in medium-to-long-term contracts for polyester and nylon-based fabrics to avoid price spikes. - Include logistics disruption and force majeure clauses in purchase contracts, specifying adjustments for rerouting or delays. - Diversify raw material suppliers outside the Middle East to reduce dependence on a single route.

For Trading Companies - For orders to the Middle East, consider purchasing additional war risk insurance and confirm rerouting plans and cost sharing with freight forwarders in advance. - Establish communication mechanisms with Middle Eastern clients to promptly update shipping status and negotiate delivery flexibility to avoid breach disputes. - Watch for diplomatic signals; resume order taking if tensions ease, otherwise postpone large new orders to control risk exposure.