Iran Conflict-Induced Fossil Fuel Price Increases Disrupt Polyester Supply Chains in South Asia, Threatening Fast-Fashion Retail Costs
Introduction
A sustained increase in fossil fuel prices, consequent to the Iran war, has placed significant financial pressure on polyester producers and garment manufacturers in India and Bangladesh. This development carries potential implications for major fast-fashion retailers, including Zara and H&M, which rely on these supply chains.
Main Body
The conflict has disrupted petroleum markets, notably through the closure of the Strait of Hormuz, a critical chokepoint for refined petroleum products. Polyester, which constitutes 59% of global fibre production and is derived from oil-based feedstocks, is directly exposed to these supply constraints. Madhu Sudhan Bhageria, managing director of Filatex, one of India’s largest polyester yarn producers, reported that the company is now paying nearly 30% more for its key inputs—purified terephthalic acid (PTA) and monoethylene glycol (MEG). This cost escalation stems from price increases by Chinese suppliers and interruptions in Middle Eastern supply routes. Beyond upstream feedstock costs, the energy crisis has permeated downstream processing. Avichal Arya, CEO of Bindal Silk Mills—a supplier of dyed and printed polyester fabrics to retailers such as H&M, Inditex (owner of Zara), Target, Walmart, and Ikea—stated that the cost of chemicals and dyes has risen “drastically.” Additionally, a shortage of cooking gas, attributed to the war, has prompted a departure of migrant workers from Surat, a major textile hub in Gujarat, India. Arya noted that this labour attrition has hindered the company’s ability to fulfil global orders efficiently. While the immediate financial burden is borne by suppliers and manufacturers, the pressure may eventually propagate downstream to retailers. However, analysts note that retailers are currently insulated from the full impact due to forward-buying practices, which provide a temporary buffer against spot-market volatility.
Conclusion
The Iran war has precipitated a cost and supply crisis in the polyester-dominated textile supply chain of South Asia, with feedstock prices rising sharply and labour availability declining. Although fast-fashion retailers face no immediate cost increases, the sustained nature of the disruption suggests that price adjustments may become inevitable as forward contracts expire.