The Strait of Hormuz carries about one-third of global LNG and over one-fifth of oil trade, so its navigability directly affects the cost curve of textile raw materials. On August 19, the UAE announced a complete suspension of trade and financial transactions with Iran, following the detection of two ballistic missiles within its territorial waters. This security alert has already transmitted from the energy sector to the textile supply chain. For polyester plants relying on Middle Eastern petrochemical feedstocks and fabric exporters targeting Middle Eastern markets, this is a window to recalibrate risk pricing.
Background
The UAE-Iran trade halt is not an isolated incident but a symptom of worsening regional security. The missile incident on August 18, coupled with earlier attacks on ADNOC tankers in the Strait, indicates that risks have spilled over from military confrontation to civilian shipping. The memorandum of understanding signed in June set a 60-day negotiation period, but with core demands—such as lifting port blockades, easing oil sanctions, and unfreezing assets—unmet, diplomatic talks have stalled. Iran has linked the reopening of the Strait to the fulfillment of its demands, making the timeline for normal passage highly uncertain.
For the textile industry, the Strait's status affects two supply chains: first, the flow of crude oil and petrochemicals from the Middle East to Asia, which are upstream of PTA and MEG; second, the shipment of textiles from China and India to Middle Eastern markets. Disruptions in the Strait imply higher costs and delays in both chains.
Industry Impact
The first impact is on chemical fiber feedstock costs. If oil prices rise due to supply concerns, naphtha and PX prices will increase, passing through to PTA and polyester chips. Although polyester plants currently have adequate inventories, prolonged disruption could force load reductions, exacerbating supply-demand imbalances. Buyers of filament and staple fiber should manage raw material inventories carefully and avoid panic buying during price spikes.
Second, the risk of order fulfillment for Middle Eastern markets has risen significantly. The UAE-Iran trade suspension directly blocks goods flows, and the overall security deterioration reduces port efficiency in neighboring countries. Shipping lines have started imposing war risk surcharges on routes via Hormuz, and some carriers reroute via the Cape of Good Hope, adding 7-14 days of transit time and increasing freight costs by 15-20%. For textile exporters targeting the Middle East, this squeezes margins and may trigger delayed payments or order cancellations.
Additionally, rising shipping insurance costs increase working capital pressure across the trade chain. Freight forwarders report that war risk premiums for Middle East routes have multiplied compared to early this year, and some high-value cargoes face difficulty obtaining coverage. For SMEs, cash flow pressure intensifies, making export credit insurance coverage and actual claim capability critical considerations.