Iran conflict drives up polyester costs, squeezing fast-fashion profits
A month-long conflict in Iran has pushed up costs for fast-fashion brands, particularly those relying on polyester. Crude oil prices have surged by 40%, raising polyester fibre costs by up to 50% and squeezing profit margins across the industry.
The war has also disrupted shipping routes, with air freight prices between South-East Asia and Europe climbing by 25%. Retailers now face tough decisions on whether to absorb the extra costs or pass them on to customers. The impact of rising costs has hit brands differently. Companies like Shein and BooHoo, which depend heavily on cheap polyester, are feeling the pressure more than rivals. Shein uses polyester in over 80% of its products, while BooHoo relies on it for around half. In contrast, H&M and Zara use a wider mix of materials, softening the blow.
H&M reported a 1.6 percentage point increase in gross margin for the quarter ending in February. Lower polyester costs contributed roughly 0.8 percentage points to this improvement. Meanwhile, Next has warned that prolonged conflict could push up input costs from the second half of the year. The retailer may raise prices if the war continues beyond three months.
Freight disruptions have added to the strain. Shipping rates between Shanghai and Rotterdam have risen by 20%, while air cargo costs have jumped by a quarter. These increases make it harder for brands to keep prices stable, especially those with high polyester dependence. The war's economic ripple effects are now reaching consumers. Fast-fashion brands with heavy polyester use face the toughest choices—either cut profits or raise prices. For now, the industry is watching closely to see how long the conflict lasts and how much further costs will climb.
