The escalating tensions in the Strait of Hormuz are no longer confined to the volatility of crude oil, petrol, or aviation turbine fuel prices. A significant yet often overlooked aspect of this geopolitical crisis is its direct impact on the global fashion industry. Most consumers fail to realize that the very oil flowing through this strategic maritime passage is the primary raw material for various synthetic fibers used in modern clothing. If the supply of crude oil is throttled, the production of these fibers will inevitably shrink, leading to a substantial surge in the prices of branded apparel across the globe.
The Oil-to-Wardrobe Connection
While missiles flying over the Strait of Hormuz might seem worlds away from your fleece jackets, leggings, or trainer shoes, the reality is starkly different. A vast majority of the clothes in a contemporary wardrobe are manufactured using petroleum-based products. Crude oil is the fundamental building block for synthetic fibers such as polyester, nylon, spandex, and several others. While fluctuations in petroleum prices typically manifest first at petrol pumps or in airfare, the ripple effect eventually reaches the fashion business. Budget-friendly fashion, such as 1 dollar tights from Shein or a 15 dollar coat from Temu, is expected to bear the brunt of these rising costs as their margins are razor-thin.
Diverging Fortunes in the Petrochemical Sector
The impact on the industry is already becoming visible through the financial performance of major petrochemical suppliers, while according to a report by Bloomberg, the Tongkun Group, which produces approximately 18 percent of the world's polyester yarn, expects its net income to triple in the six months leading up to June compared to the previous year. This surge is attributed to fashion companies hiking prices in anticipation of supply disruptions, while the company utilizes raw materials purchased when oil prices were lower. In China, polyester futures surged by 25 percent in March, reaching their highest level in nearly four years.
However, the situation isn't favorable for all players. Hengli Petrochemical has seen its shares plummet by nearly one-third this year. The company, which converts crude oil into polymer resins and fibers for suppliers like Tongkun, has been forced to halt production due to supply shortages. In April, synthetic fiber production in China fell by 11 percent compared to the previous month, marking its lowest level since 2024. Tongkun itself remains in a precarious position, relying on short-term bank loans and rapid customer payments for working capital. Any prolonged disruption in the Iranian conflict zone threatens this fragile supply chain.
The Role of Recycled Materials and ESG
The crisis highlights the importance of Environmental, Social, and Governance (ESG) initiatives. Companies that have invested in alternative material chains, such as recycled fibers, are better positioned to withstand oil supply shocks. For instance, Inditex SA (the parent company of Zara) and Hennes & Mauritz AB (H&M) are in a stronger position than Fast Retailing Co. (the parent of Uniqlo). While almost all of Zara's polyester comes from recycled materials, less than half of the specialized functional fabrics used by Uniqlo are made from recycled sources. This makes brands reliant on virgin plastic more vulnerable to the Hormuz crisis.
Impact on Natural Fibers and Future Outlook
Natural fibers like cotton are also not immune to the conflict. India, the world's second-largest cotton producer, depends heavily on the Gulf region for natural gas and urea required for fertilizer production, while although production has not been hit yet, the market is tightening. In May, cotton prices reached a two-year high, and global stocks are approaching their lowest levels in a decade. According to Paul Vogel, CFO of VF Corp (owner of Timberland and North Face), the full impact on profit margins may not be fully realized until the financial year ending March 2028. This suggests that the clothing crisis could be long-lasting, turning wardrobes into a significant collection of single-use plastics for those who buy and rarely wear their online purchases.