Bangladesh's textile industry faces a cost shock amid the Iran conflict

Bangladesh’s textile and garment industry is facing a cost shock as the Iran conflict lifts prices for key fabric and fiber inputs, squeezing margins in a sector already under pressure. Apparel manufacturers say higher costs are already being felt, while buyers are reluctant to accept price increases on existing orders.

Input prices rise as conflict disrupts energy-linked supply

Industry leaders attribute the increases to higher global oil prices and supply-chain disruptions affecting petroleum-based inputs. They report that prices for synthetic fibers and chemicals have risen by about 10% to 15%, with at least one input surging as much as threefold. Navidul Huq, CEO of Mohammadi Group, said prices are rising across fiber types and raw materials, not only polyester and nylon.

Asif Zahir, CEO of Ananta Group, said synthetic fibers, yarns, and fabrics are becoming more expensive. Shams Mahmud, CEO of Shasha Denim, linked input cost increases to oil and said the rise is roughly 10% to 15%, with several chemicals increasing even more. He cited sulfuric acid used in fabric finishing, which has moved from about 50 taka per liter before the war to around 150 taka today.

Higher energy costs spread to other production inputs

BGMEA leaders said the cost pressures are extending beyond fibers and chemicals to other energy-related inputs. Shams Mahmud Hasan Khan, Chairman of the Bangladesh Garment and Textile Manufacturers and Exporters Association (BGMEA), said some suppliers are raising prices in anticipation of future difficulties. He also warned that firms cannot pass these increases onto buyers for current orders, leading to short-term losses.

He added that production schedules depend on reliable energy supply. “If we cannot ensure a continuous supply of gas and electricity, we will not meet production schedules,” he said, noting that firms may have to switch to air freight, which would be substantially more expensive.

Logistics costs could increase as fuel shortages affect transport

While industry leaders said the impact is currently mainly on costs and there have been no major delivery disruptions yet, they cautioned that logistics expenses could rise in the coming weeks. Exporters said the full effect remains muted because shipment volumes have only recently recovered after Eid holidays.

Shehab Udduza Chowdhury, Vice-Chairman of BGMEA, said freight costs are rising due to diesel shortages. He said transport operators are detouring or traveling longer distances to secure fuel, increasing costs for both imports and exports. “When transport costs rise, buyers seek to push the burden onto us,” he said.

Energy security tightens amid limited diesel access

Energy security is emerging as a major risk. Chowdhury said the government has introduced a temporary mechanism allowing factories access to limited diesel, mainly for backup generators, with some facilities receiving about 500 liters with certification. He said overall supply remains tight.

He described mounting pressure from fuel constraints, including long queues at gas stations, rationing measures, and operational changes such as discussions about moving schools online and shortening weekend hours for offices. Government offices have shortened working hours, while markets and shopping centers close before 6 pm.

Demand outlook mixed; recent demand drop and market concerns

Garment production is currently stable due to pre-stocked inputs, but BGMEA leaders warned pressure could increase if new input imports face disruption. On demand, the outlook is mixed: exporters reported no immediate order cancellations in major markets such as the United States and Europe, though concerns remain after months of weak activity.

Exporters also pointed to weakening conditions in the Middle East, a region previously viewed as a growth engine. Khan said, “The Middle East is a market we are trying to expand into to diversify, but it has been significantly affected. If the conflict endures, buyers may become more cautious.”

Chowdhury added that total demand fell about 25% year over year last month, reflecting inflationary pressure in export markets and trade disruptions. As inflation rises, he said consumers reduce spending on apparel, prioritizing essentials such as food and health care.

Broader pressures follow a difficult 2025 for exporters

The spillover from the Iran conflict comes after a challenging 2025 for Bangladeshi garment exporters, particularly small and medium-sized enterprises. Leaders cited U.S. tariffs and rising competition in Europe, where exporters often benefit from favorable exchange-rate policies and stronger logistics networks.

Mahmud emphasized that the central challenge is the current level of uncertainty.