Armed conflict around Iran and the consequent choking of freight from the Persian Gulf via the Strait Hormuz has driven oil prices to high levels. The economic effects of high oil prices are manifold. In this article we take a look at what is happening to apparel fibre prices.
Oil prices are quoted from many regions. Usually prices from different regions are similar. However in the current situation US oil prices (using the West Texas Intermediate quote) are some US$35-40 below the Dubai quote with the European (Brent) quote somewhere in between. The World Bank uses an average of these three quotes, which is what is used in this article.
Figure 1 shows the average World Bank oil quote from early 2015 to the current month (for which an estimate is used). The price is in US dollars per barrel (which is 159 litres or 42 gallons). In 2022 the price series topped US$110 for most of the April to July period, following the Russian invasion of Ukraine in February 2022. From these high levels the oil price trended lower through to late 2025. In March 2026, with the restricted trade through the Gulf of Hormuz the price series has returned to US$110, a rise of 81% in price from late 2025 levels.
Oil provides the feedstock for synthetic fibres such as polyester, acrylic and nylon so these fibres are sensitive to large changes in oil prices. Figure 2 shows prices series for a weighted average of oil based synthetic fibres, natural fibres (cotton and cellulosic fibres) and the 19 MPG, and in US dollar terms from early 2015 to this month. Both the natural and oil based fibre prices drifted lower from 2022 through to late 2025. The 19 MPG peaked in 2021, on the rebound from the COVID-19 induced lows of 2020 and then had drifted lower through to 2023, before finding a base level and trading at that until late 2024. The 19 MPG picked up in early 2025, before rising strongly from mid-2025.
Since December 2025 the World Bank average oil price has risen by 81%, the 19 MPG has risen by 23%, the oil based fibre price series by 25% and natural fibres by 3%.
To get the three fibre prices series onto a common scale Figure 3 shows the year on year change for each one, starting in early 2016. This schematic shows how the different apparel fibre prices tend to follow each other, with similar trends, peaks and troughs. The rise in the 19 MPG from mid-2025 has been unusual in that it was not reflected in the natural or oil based fibre prices until now, when for a different reason altogether the oil based fibre prices have risen strongly. This is becoming an even more unusual market, where we have what appears to be a supply shock driven wool market accompanied by a synthetic fibre market being driven by an oil shock.
At this stage higher oil prices are not adding significantly to freight costs for shipping wool, especially for the Australia to China journey.
Where we go from here is anyone’s guess as it will depend on how long the Iranian conflict continues and consequently for how long and how high oil prices trade. Looking out a year, if oil prices stay at elevated levels for some time then economic activity in 2027 will slow and demand apparel fibre demand will slow in turn.
What does it mean?
The greasy wool market was in the throes of what appeared to be a supply shock when an oil shock developed and is driving oil based synthetic fibre prices higher. In the medium to longer term higher oil prices point to weaker economic growth which will lead to weaker demand for apparel fibres. However this all takes time to play out. In the meantime supply and oil shocks are driving a large section of the apparel fibres market higher.
Key Points
- Oil based synthetic fibre prices have lifted strongly in reaction to higher oil prices.
- Fibres from natural sources (cotton and cellulosic) have had very modest price rises
- The outlook is most uncertain as it depends on what happens with the Iranian conflict
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, AWEX, Emerging Markets, Fibre year, RBA, World Bank ICS, Mecardo
