The Strait of Hormuz carries about one-third of the world's LNG and one-fifth of its crude oil, and now the order of this energy artery is being directly disrupted. On August 19, the UAE announced a suspension of all trade, commercial exchanges, and financial transactions with Iran, with no resumption date set. Combined with two ballistic missiles that landed in its territorial waters earlier, the security alert has spread from the military to the commercial sphere. For the textile industry, the impact is not just a headline; it is spreading through energy costs, shipping premiums, and delivery lead times to the far ends of the global supply chain.
Event Background
The UAE's economic halt with Iran has severed the long-established flow of goods and funds between the two countries. For textiles, Iran is an important consumer market in the Middle East, while the UAE serves as a transshipment hub, with large volumes of yarn and fabric from China and India transiting through Dubai to Iran and other Gulf states. Now this channel is interrupted, forcing export orders that relied on this route to find alternatives or face suspension.
Meanwhile, the risk of transiting the Strait of Hormuz has risen sharply. Two oil tankers of the Abu Dhabi National Oil Company were attacked earlier, and missiles landed in UAE waters on August 18, prompting shipping companies to raise security alerts. Many carriers have added war risk surcharges for vessels passing through the area, and some have chosen to reroute via the Cape of Good Hope, adding about two weeks to voyages and increasing container freight costs by 30-40%. For textile exporters that depend on timely delivery, this uncertainty is critical.
Notably, diplomatic efforts had shown a glimmer of hope. In June, parties reached a memorandum of understanding to start multi-topic negotiations within 60 days, covering demands such as lifting port blockades, oil restrictions, asset disposal, and ending military confrontation. But as differences widened, talks stalled, and Iran stated that the strait would only reopen if its demands were met. This means that a near-term resumption of normal transit is unlikely, and supply chain tensions will likely persist.
Industry Impact
For the chemical fiber industry chain, the first impact is on raw material costs. The region is a major producer of oil and gas, and upstream materials like PX and MEG are derived from naphtha. Disruption in the strait has already pushed oil prices up, and if the situation continues, import prices of PX and MEG will rise, squeezing the profit margins of polyester plants. For clusters like Shengze and Keqiao, this means increased procurement cost uncertainty, requiring more careful inventory management and hedging.
On the export side, the Middle East is also an important destination for Chinese textiles. In 2025, China's textile exports to the Middle East grew by about 12% year-on-year, with the UAE as the largest transshipment center, distributing fabrics and home textiles across the Gulf. Now the UAE-Iran trade halt not only affects exports to Iran but may also impact transshipment efficiency. Some freight forwarders have suspended bookings to Iran, and goods transiting through Dubai face delays due to extended customs and transloading. For textile exporters focused on the Middle East, short-term delivery pressure has increased significantly.
More profound is the impact on the global shipping landscape. The persistent risk in the strait has prompted some carriers to redeploy capacity from Middle East routes to other regions, causing localized tightness in global container capacity. Freight rates on Asia-Europe and Asia-US East Coast routes have already seen slight increases, adding cost pressure to all textile exporters. For apparel and home textile companies that rely on sea freight, higher freight rates will directly erode profit margins.
Practical Recommendations
To cope with this geopolitical risk, textile companies need to strengthen supply chain resilience and diversify markets. In the short term, monitor the strait situation and freight rate changes closely, adjusting shipment plans accordingly; in the long term, reduce dependence on a single transshipment hub and explore alternative markets.
For Procurement Teams - Reassess delivery lead times of Middle Eastern suppliers, and include force majeure clauses in contracts to cover delays caused by shipping disruptions. - For orders involving Middle Eastern transshipment, consider air freight or China-Europe rail as alternatives, despite higher costs, to ensure timely delivery. - Build safety stock of raw materials, especially chemical fiber inputs, and lock in forward purchase contracts based on oil price trends to avoid cost volatility.
For Foreign Trade Enterprises - Review existing Middle East orders, negotiate adjusted delivery schedules or partial shipments with clients to reduce risk of goods in transit. - Actively explore alternative markets such as North Africa and Southeast Asia to diversify country risk and reduce reliance on the Middle East. - Monitor changes in export credit insurance policies for the Middle East and purchase coverage to mitigate payment risks.
The situation remains uncertain, but one thing is clear: the global textile supply chain has become highly sensitive to geopolitical risks. Only by embedding risk awareness into daily operations can companies remain competitive amid turbulence.