War on Iran is about to make clothes more expensive. Here’s why

Planning to update your wardrobe this summer? Industry insiders have some advice: do it soon. By the time autumn collections hit the racks, the aftershocks of war on Iran may have quietly picked your pocket. Clothing manufacturers and industry analysts are warning consumers to budget for price increases of 10 to 15 per cent as South Asia’s US$50 billion garment export industry reels from a cascade of war-driven shocks. Iran’s blockade of the Strait of Hormuz has choked natural gas supplies to the subcontinent, sending power bills rocketing for the factories that stitch together much of what the world wears. Meanwhile, Iranian drone and missile attacks targeting Gulf airports, Dubai’s in particular, have pushed air freight rates for fast-fashion orders up by as much as 70 per cent, making the route, in the words of one analyst, “far less viable”. The full pain has yet to reach shoppers. Orders placed months ago at fixed prices mean South Asian manufacturers are currently absorbing much of the higher energy and logistics costs themselves. But that buffer is finite and once current inventories are depleted, price rises will follow. Before the war, Gulf petrochemical plants were South Asia’s primary source of the raw materials used to make synthetic fibres – polyester, nylon and acrylic – that nearly two-thirds of clothing manufactured worldwide contain. Yet the subcontinent’s garment factories can no longer easily obtain the petrochemical feedstocks derived from fossil fuels like crude oil and natural gas that go into creating these man-made materials. Everyone expects price rises Julia K. Hughes, US Fashion Industry Association Lahore-based manufacturer Cotton Web, which produces some 1.2 million garments a year for Western brands, hedges against swings in yarn and fabric costs, but rising utility and transport bills are a different matter entirely. “Not only do we fear loss of [profit] margin on the already placed orders for autumn-winter, this will put us in a difficult position as compared to other regional peers with more stable logistics for next season,” said company CEO Waseem Akhtar Khan, a former chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association. How much of the increased costs are passed onto customers, and how fast, depends largely on where a brand sits in the market. Budget and mid-price labels tended to hold the line until inventories run out, then reprice, while premium brands were more likely to absorb “some portion” of the increase to protect customer loyalty, Khan said. Either way, he agrees with analysts’ forecasts: expect clothing prices be as much as 15 per cent higher by the end of the summer if the conflict persists. Over in the United States, the world’s biggest consumer market, Julia K. Hughes, president of the US Fashion Industry Association, said most companies were offering the same answer when asked about the war’s impact on their business: “I don’t know.” American retailers are not yet reporting shipping delays – most US-bound apparel avoids the disrupted Gulf routes – but Hughes expects the effects to be felt within weeks if disruptions continue. “Everyone expects price rises,” she said. Margins under fire South Asian textile suppliers face a “sharp profit squeeze” because orders fixed months in advance leave little room to pass higher energy and fibre costs on to buyers, according to Jakir Ahmed, an analyst with industrial data firm IBISWorld. The immediate effect is a damaging trifecta: unsold stock building up, delayed payments and freight costs piling on top of already elevated production expenses. Larger suppliers can negotiate their way through the crisis, accepting thinner margins or prioritising their most valuable clients. Smaller ones have far fewer options, however. With limited cash reserves and weaker bargaining power, small suppliers risked fulfilling orders at a loss or losing future business altogether if delays led to cancellations, Ahmed said. For countries like Bangladesh and Pakistan, the garment industry is more than a mere export earner, it contributes a sizeable chunk to their economies and employs millions of people. Sustained disruption would widen trade deficits and weigh on economic growth, warned Farwa Aamer, director of South Asia initiatives at the Asia Society Policy Institute in New York. This was a serious concern for economies “operating under tight macroeconomic conditions and IMF-supported adjustment programmes, leaving limited fiscal space to absorb external shocks”, she said. “This translates into immediate pressure on export volumes, employment and foreign exchange earnings.” Another concern is Western brands diversifying away from South Asia to reduce exposure to future supply chain shocks. “Even partial relocation of sourcing could translate into substantial job losses,” Aamer said. That shift was already under way in the wake of the pandemic as brands diversified supply chains. Gaetana Mak, an IBISWorld research team leader, said she expected the Iran war to accelerate the “existing near-shoring trend” rather than trigger a sudden exodus from South Asia. But the commercial logic of near-shoring production closer to consumer markets has certainly not been lost on retailers, particularly for fast fashion where lead times are everything. Inditex, which owns brands including Zara, Pull&Bear and Bershka, now sources more than half its production from Spain, Portugal, Morocco and Turkey: a model other retailers are adopting too. Houthi attacks on Red Sea shipping in 2024-25 had first nudged brands in this direction and the Iran war was making the case harder to ignore, Mak said. The likely outcome will be a global supply chain split in two: near-shoring for agility, alongside continued reliance on South Asia for high-volume, cost-efficient production. Even with major retailers like H&M, Inditex and Primark adopting diversified sourcing and flexible logistics, “prolonged delays can still disrupt replenishment cycles”, Mak said. Shoppers need not picture empty shelves and bare rails. A supply chain and energy crisis in 2022 triggered by the Ukraine war “caused missed shipments and delays”, rather than across-the-board shortages, she said. Mak said the latest disruption was likely to cause “selective, rather than widespread” gaps concentrated in seasonal and high-turnover fast-fashion lines. Khan was less sanguine about fast fashion specifically. The business model ran on just-in-time manufacturing and injecting delays and air cargo congestion into that equation meant “brands can suffer inventory stock-outs”, he said. The Cotton Web CEO’s advice to shoppers? “Rely more on natural fibres as compared to synthetic products, which are more prone to cost increases,” he said, smiling. And above all, take advantage of this summer’s sales. Next year, the bargains may not be there.

War on Iran is about to make clothes more expensive. Here’s why

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Rising freight and energy costs, plus a near-blockade on synthetic fibres, are pushing prices higher

Rising freight and energy costs, plus a near-blockade on synthetic fibres, are pushing prices higher