Rising Risk Premium in the Strait of Hormuz: Chain Reactions in Textile Trade Supply Chains

International oil prices jumped sharply after news of disrupted navigation in the Strait of Hormuz, with Brent crude briefly breaking above $90 per barrel. For the textile industry, this is far more than a headline—every $10 rise in oil prices increases chemical fiber production costs by about 800 yuan per ton, while order delivery and payment risks in Middle Eastern markets are also climbing.\n\n## Event Background\n\nOn August 19, the UAE announced a suspension of all trade, commercial, and financial transactions with Iran, with no timeline for resumption. A day earlier, the UAE Defense Ministry monitored two ballistic missiles, one of which landed in its territorial waters. Earlier, two tankers of the Abu Dhabi National Oil Company were attacked in the Strait of Hormuz, and UAE vessels have repeatedly reported dangerous passages.\n\nThe Strait of Hormuz carries about one-third of the world's seaborne crude oil, making it a vital energy artery. Navigation order has already been visibly disrupted, with some shipping operators choosing detours or suspending transits, and insurance costs rising. A memorandum of understanding reached in June had planned up to 60 days of multi-topic negotiations, but differences have stalled diplomatic efforts.\n\n## Industry Impact\n\nFor the textile chain, the most direct transmission is through oil prices. Chemical fiber raw materials such as PTA, ethylene glycol, and polyester filament are all petroleum-based; rising oil prices will push up production costs and subsequently affect fabric quotations. For textile exporters focused on the Middle East, the UAE-Iran trade halt means order delivery and payment recovery may be blocked, and some long-term partnerships are forced to pause.\n\nMoreover, rising shipping risks will also increase freight and insurance rates. Container routes relying on the Strait of Hormuz may face diversions, extending transit times and raising costs, thus affecting delivery schedules. For home textile and apparel companies targeting the Middle East, short-term logistics uncertainty has clearly increased. In the longer term, if tensions persist, volatility in global energy supply chains will spill over to all industries dependent on petrochemical raw materials, and textiles cannot escape.\n\n## Practical Advice\n\n### For Buyers\n- Include price adjustment mechanisms in contracts to address major oil price fluctuations, avoiding unilateral cost absorption.\n- Monitor vessel movements on Middle East routes, confirm with forwarders whether diversions or delays occur, and allow buffer time.\n- Assess the performance risk of Middle Eastern suppliers and consider backup sourcing channels to diversify supply.\n\n### For Exporters\n- Use prudent payment methods for Middle Eastern clients, prioritizing letters of credit or prepayments to reduce collection risks.\n- Purchase cargo insurance covering war risks to hedge against losses from shipping interruptions.\n- Closely follow diplomatic progress; if the situation worsens, adjust market strategies and explore alternative markets.