How Oil Shock Fears Are Rippling Through Fashion

0:07Sheena Butler-Young: Hello and welcome to The Debrief from the Business of Fashion where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young.

0:19Cathaleen Chen: And I'm executive editor Brian Baskin. The U.S. and Israel are at war with Iran in what has quickly escalated into a broader regional crisis. Israeli and U.S. strikes on Iranian targets have provoked retaliations. And crucially, Iran has threatened shipping through the Strait of Hormuz, promising to not let a single drop of oil leave the region.

0:40Sheena Butler-Young: That has set global markets on edge. The Strait of Hormuz is a crucial artery for the world's oil supply. After Iran shut down shipping through the strait, crude prices briefly jumped above$100 a barrel before pulling back again on Monday. But the last time prices reached that level was after Russia invaded Ukraine in 2022.

1:00Cathaleen Chen: The price of oil matters to the fashion industry at every level. It affects how much it costs to power a garment factory. And if those clothes were made from synthetic fabrics, the cost of the garments themselves. There's shipping expenses to consider. and consumers are less likely to go shopping if they're paying an extra dollar or two a gallon to fill up their cars. To understand this multi-layered story, we're joined by BOF's Shaiza Waleed and Kat Chen to unpack what the industry needs to understand about this rapidly unfolding energy crisis. Shaiza, Kat, welcome to The Debrief.

1:33Sheena Butler-Young: Thanks for having us. So, Shaiza, why don't we start with you? Let's set aside for a moment the very real and very devastating human toll of this conflict. Can you tell us at the most basic level why fashion executives should care about what's happening in the Strait of Hormuz?

1:48Shayeza Walid: I think this crisis and the Strait of Hormuz being closed, it kind of shows how a regional conflict can have global ramifications in real time. So with this particular situation, the Strait of Hormuz is one of the maritime passages through which about one fifth of the world's oil and gas goes through. And in Asia, where majority of the fashion supply chain lies, you know, we have our biggest producing countries, China, India, Bangladesh, Vietnam, Indonesia, they outsource and they have their oil come from the Gulf to Asia. Reuters reported that Asia imports about 60 % of its crude from the Middle East.

2:24Shayeza Walid: And with the Strait of Hormuz being closed, a lot of that supply is now stuck in the Gulf or not passing through. And one of the large barriers to that is the fact that there is no insurance for logistics and shipping companies to kind of pass through the oil and gas that's needed. And as a result of that, producers in these manufacturing hubs, they're already facing crises of cost when it comes to, first of all, the volatile oil prices, but also in general with energy supply.

2:51Cathaleen Chen: I saw one report that certain synthetic fabrics, the price had already gone up by 10 percent basically overnight. I mean, does it really work its way through the system that quickly?

3:00Shayeza Walid: Yeah, I would say so. When I spoke to kind of export associations in India, and also I saw some reports in China, they said that man-made fiber prices were already going up. And that's because the quantity that's being made is being reduced when the prices are increasing. That's what one of the people in India told me. And synthetics in particular, there's areas in India that are very focused on synthetic textile production. And those areas could near will be crippled if the crisis continues, because they only use that type of fabric. And those are the people that are employed there.

3:30Cathaleen Chen: Wow. So what's the general mood of the people you're talking to there? I mean, are they panicking? Are they kind of just wait and see? Are they assuming this will be over soon and not too worried?

3:40Shayeza Walid: I think the word that came out repeatedly in like the four or five calls that I had was apprehensive and apprehension, but also this idea of wait and see. A few of the people, considering all the tariffs turmoil that happened over the last year, they're like, you know, we've been through this and we've been through many other crises. So there's no reason we can't go through this right now. That being said, the kind of concern that they had was the fact that when consumers will feel this impact or if they do, if the situation persists, that means demand will decrease. And that's what they're kind of more scared of, which is this possible idea of inflationary pressures.

4:14Shayeza Walid: But in terms of the current situation and facing the pressures of energy shortage or cost increases, they think that they can kind of overcome this if they're resilient.

4:22Sheena Butler-Young: So based on what you've heard, you've had six major conversations on this. At this point, do you think this will be best understood or most lived out as a sourcing risk, a logistics risk or an inflationary story?

4:34Shayeza Walid: So I think in the immediacy, it's a logistics risk story because every single person is dealing with the fact that oil and gas supplies are not coming through to their countries. Some countries have more diversified sourcing like India and China. So they're able to kind of have a buffer right now. But a lot of people told me that it's a supply issue and a logistics issue before it's a cost issue right now. And so the fact that shipping line companies are charging things like a war surcharge, it's making costs higher for suppliers already. And that's one of their major concerns right now. The government of India, the Department of Shipping actually put out a statement yesterday directed to shipping companies and logistics companies saying that they shouldn't unfairly charge suppliers or exporters and importers surcharges because of the conflict in Iran.

5:21Shayeza Walid: And so that's something that's kind of playing out as we speak. And for the inflationary story and in terms of the sourcing story, I think that's something that will happen if the situation persists.

5:30Cathaleen Chen: I'm curious when you talked to some of these people, because one thing we haven't noted yet is that oil prices have actually come back down from they spiked from about$85 a barrel up to almost$120 a barrel late Sunday, early Monday. And they've fallen steadily since, in part because President Donald Trump said that, you know, he expects the war to conclude soon. And I'm curious, you know, when you were talking to people where prices more at the 120 level or more at where they are now, you know,$85.

6:03Shayeza Walid: I spoke to two people yesterday and for today. And when I kind of talked about the oil pricing, I'm not going to say any of them sidestepped it. They definitely saw it as a major pressure and talked about the macroeconomic perspective. But in general, all of them kind of had two cents to say about how they don't really trust Trump's words and they can't rely on that to take action on scarcity. And they kind of said that one day prices will go up, the next day it'll go down. But we can't kind of depend on that to take action when it comes to the scarcity and the fuel crisis that they're facing right now.

6:33Sheena Butler-Young: Can we double click on the wartime surge? Shiaza, like what does that mean? Is that something that is being applied to things? it sticks no matter what the market does or no matter what oil prices do?

6:45Shayeza Walid: Yeah. So this was something I personally found really fascinating because there's no standardization for this. So different shipping companies will charge different surcharges depending on what kind of route they're taking. So because the street is closed right now, one of the passages some logistics companies are taking is kind of around Africa on the Cape of Good Hope. Some of them are trying to use the Swiss Canal. And it really depends. And it seems like, you know, there were some names thrown out about shipping and logistics companies, but I couldn't verify them in short time as what their actual pricing is.

7:15Shayeza Walid: But it seemed like it varied from like$1 ,200 to$4 ,000. That would be for one vessel.

7:21Sheena Butler-Young: Well, let's bring in Kat for a little bit here, because I think, as Shea has explained it, the macro story is quite clear, but there's also some movement happening, you know, outside of the Middle East. Kat, can we talk about what executives in the US are saying? Is it reaching the conversation in a big way here? Are you having conversations right now that it seems like people are worried about this? Yeah, absolutely.

7:44Brian Baskin: This is kind of like the macro macro story, right? Because one thing we do know for sure is that if oil prices continue to go up, there will be a dip in consumer confidence. Now, the question is, you know, how long is that lag and to what extent? When companies are seeing their freight costs go up right now, they're not going to immediately factor that into their prices. And so when we're, you know, when we're thinking about inflation and apparel, that is a possibility months down the road. The more maybe immediate effect on the consumer economy is simply psychological. I think, you know, Americans have trauma from the oil crisis from the 70s, there's this conception that any sort of shock in oil means a recession is coming up.

8:40Brian Baskin: And I spoke to an energy consultant this morning, and she was very adamant about the fact that that kind of economic catastrophe, at least in the U.S., is very, very, very unlikely. However, that sort of lingering feeling, the psychology of seeing oil prices go up in this six-foot neon sign, I think that has a jarring effect on how consumers approach their spending.

9:09Cathaleen Chen: And it's not like consumers were really gung-ho to begin with, right? I mean, sentiment is already pretty low, right?

9:16Brian Baskin: Yes. Yeah, absolutely. Heading into 2026, consumer confidence dipped. We've talked a lot about the case-shaped economy, how higher income consumers are going to drive or are driving the bulk of spending in the U.S. What's interesting in my reporting, I learned that oil consumption is consistent across income households. So the average American, whether they're wealthy or poor, they spend around the same on oil, right? So like the maximum is like someone is driving three hours a day and probably not more than that. And so this means that as prices go up, it's going to be the lower income households that hurt the most because it's a bigger share of their wallet.

10:04Brian Baskin: And so when we're talking about, you know, retailers that are exposed, we're looking at retailers that are serving maybe a lower income customer. Wow.

10:14Cathaleen Chen: So it could really turbocharge that K-shaped economy that we're always talking about.

10:18Sheena Butler-Young: Yes, exactly. Well, the other thing I just want to say, like, anecdotally, like fuel is up about 50 cents a gallon or something like that. I saw on the news this morning. It just doesn't, to Kat's point, I don't feel motivated to go to the mall right now and buy things. There's the geopolitical backdrop. You turn the news on, that feels depressing. You ride by the gas station, that feels, 50 cents is not, doesn't sound like a lot, but if a tank is 40 bucks and now it's 50 or 60, that does make a difference psychologically. And I think it's hard to understate what people are feeling right now. to Brian's point, just in terms of turbocharging that K-shape.

10:55Sheena Butler-Young: And I think it might be middle class, upper middle class down, not just the lower end.

11:00Brian Baskin: Yeah, I think there's also just anxiety around inflation, which is, you know, another word that's been in the conversation for what it's felt like, you know, years at this point. And there's actually debate on whether there will be inflation at a significant degree or not. I know that there's been some high-profile interviews between the Fed and certain economists. And from my reporting, my understanding is that if we do see inflation in apparel in particular, it will be in the latter half of the year. We're not going to see the effects yet. However, it's the consumer anxiety around inflation Even if inflation isn't here yet, that's going to affect how much they're willing, how much they're happy to spend on things like a pair of jeans.

11:56Cathaleen Chen: So it's a lot like with the tariffs last year where companies have their stockpiles of clothing in their warehouses and stores and they work through that. And, you know, they take some measures early on. But then if oil prices stay high for a long time, eventually they have no choice but to pass that along.

12:13Brian Baskin: Exactly. There's always a lag.

12:15Sheena Butler-Young: What about communication? Like similar to tariffs, we had a lot of debates editorially about how, if at all, fashion companies should be communicating to consumers around not the geopolitical backdrop, but like expecting price increases, not expecting price increases, or simply like justifying the value of something special in this climate. Is there anything that you've heard so far about communication on this? Best practices?

12:40Brian Baskin: Right now, I think we're just in very much the early days. The freight costs have not shown up as even a line item yet for a lot of retailers, right? And so I think most people in the industry are observing the situation. Around tariffs, you know, I've spoken to some brands that communicated price increases, And those went over really well, especially for smaller brands that are able to be very transparent about, hey, you know, we have this number of costs and, you know, XYZ costs are now going up. I don't think, though, that it's entirely necessary. I think we have lived in this perpetual state of volatile costs and raw materials, labor, all of these things are rising in the past couple of years.

13:31Brian Baskin: And I think there is a lot of understanding among consumers that, you know, costs are always rising. I also think that inflation in apparel has sort of leveled out in the past couple of years, you know, and and the consumer has been quite resilient, at least in the U.S. Now, in Europe, I've heard that with the situation, the impact of oil prices in Europe, it might be a whole nother conversation about consumer confidence. But at least in the U.S., you know, my hunch is that things will sort of chug along, at least for a while in 2026.

14:04Cathaleen Chen: Yeah, it feels like that's what the markets are saying, even about the Iran war, you know, with oil prices already giving up a lot of the gains that they've made these last couple of weeks. But I'm curious, a lot of what we've been talking about is that kind of short-term spike scenario, but there's a whole other scenario where prices stay elevated for months, years, even if there's instability in the region, maybe not quite at the level we saw on Sunday, but much higher than now. And I'm curious, Shayza, I mean, are there changes that could happen to fashion supply chain if they can no longer be guaranteed cheap energy?

14:43I think that's something that no one was able to fully answer outside of the fact that they think that the macroeconomic perspectives are going to have longer term repercussions for them in terms of consumer demand.

14:58Shayeza Walid: And one of the things that came up with the cheap energy situation was that they think everyone's going to be in the same boat and they think that it's going to be kind of, I guess, a spiral, if you will. That's kind of the terminology that came up. But it wasn't very clear as to, you know, that they're even foreseeing that they won't have access to cheap energy. They think it's going to be a short lived issue. I don't think it's something that they want to entertain. And I think the level of distress was pretty clear from them.

15:24Sheena Butler-Young: Well, I feel like this also goes to show just how fragile from the tariffs to obviously something way more intense, such as, you know, this geopolitical conflict, just how fragile these fashion supply chains are. Right. But I think you mentioned that they might be resistant to having to like hoping that this goes away or that maybe they don't have to face it. But some structural changes have to feel more urgent now. No.

15:48Shayeza Walid: Yeah, I would say so. I think what they're asking for and when you mentioned the structural change, they're actually asking for their governments to kind of show up for them. Local governments, I think, play a pretty big role here when we're talking about supply chains that oftentimes maybe falls on the back burner. and manufacturers spoke to this, suppliers spoke to this and associations spoke to this. So they're kind of expecting their governments to show up and do quote unquote, whatever it takes to keep the industries alive at any cost, because the other cost of it is that there can be major unemployment if factories shutter.

16:19Shayeza Walid: And that's something that, you know, it's definitely possible, but I don't think it's something that people want to consider right now. I think they're trying to kind of just go over this obstacle or this blip, if you will.

16:28Cathaleen Chen: And this is really speculative, but I wonder, I mean, do higher oil prices lead to swinging back toward natural fibers to make clothing? I recall in a past life, I covered commodities for the Wall Street Journal.

16:42Sheena Butler-Young: Don't be modest, only for a decade, right?

16:45Cathaleen Chen: Yeah. Anyway, one story I remember we did was that in the 2010s when oil was quite cheap, that was the moment that synthetic fabrics overtook cotton in the US apparel mix. And that had reversed a trend in the other direction from the 2000s when oil was quite expensive. And it's been kind of in the back of my head here, you know, let's say oil prices don't come down again. Shazza, you cover sustainability in addition to supply chain. I mean, in a way, there's a, I hate to say a benefit, but, you know, potentially a benefit from a climate perspective, right?

17:20Shayeza Walid: Yeah. I mean, this is actually something I asked brands and suppliers. And H &M actually came back and said that they're kind of phasing out of virgin fossil fuels. from the material mix has actually been quite beneficial for them in these kind of situations because it's helped reduce dependency on fossil fuel energy in general. That being said, a lot of their transports are still done by sea. And that's more of like, I guess, a regional issue right now or a geographic issue. But they've definitely said that that's something that's helped them, I want to say, buffer out the fact that this polyester is being impacted right now.

17:52Shayeza Walid: And in terms of like regional impacts, Brian, you're asking about if it's going to increase are moved towards cotton production. I don't know if that's particularly true because the cotton supply chain is so, I guess, isolated to certain parts of the world. It seems like lots of other big manufacturing countries, take China or Bangladesh, for example, they're still very polyester heavy. So I don't know if they kind of force that happening, even if prices rise, I think they would have to find another way, or maybe subsidizing through their national governments to make it work.

18:24Brian Baskin: I also spoke to an analyst today who said he made a really good point if we're looking at polyester versus cotton that polyester as a byproduct of oil is sort of very far removed like the byproduct end product whereas cotton is just cotton and so if there were volatility in cotton the effects of it would be a lot more acute than for oil and polyester.

18:50Cathaleen Chen: And what about renewables? I know that there's been a transition away from coal in certain parts of the supply chain, but it's also been pretty stubborn. Fossil fuels have been pretty stubbornly used in fashion manufacturing. Is there potential for that transition to accelerate because of this?

19:08Shayeza Walid: I mean, I think, again, it goes to a country by country basis. So for example, in places like India and Sri Lanka, that could definitely be the case because they're setting up kind of renewable infrastructure that's nationally subsidized that can definitely accelerate that. And in manufacturing, in fact, said that, you know, them having ability to have solar storage has really helped them. Whereas in Bangladesh, there's no facility or capacity for solar storage, even if they have that, they can only use it during the daytime, and they need to have diesel and fuel backup generators. So it's really going to create a lot of inequality in which manufacturing hubs are able to succeed and which have to ride the wave.

19:42Cathaleen Chen: Or the war could end tomorrow or while we're recording this and none of this ends up mattering all that much in the long run.

19:49Sheena Butler-Young: Should we bring it to a close by sort of reflecting on what Brian just said, that we don't know if it's going to be short-lived or not. But is there anything that fashion leaders are underestimating when it comes to the story? Whether it's, you know, the oil itself or the human impact or something else, even if it ends tomorrow, is there anything that could be residual here that this industry could be underestimating?

20:11Brian Baskin: I think that we've had more than half a decade of just volatility starting with the pandemic. And I think a lot of retailers have actually made systemic changes to either their supply chain or their decision-making infrastructure to be very nimble in the situation of crisis. This is a developing story, of course, but it sort of pales in comparison to what retailers went through last year with the tariffs. And again, this year with the tariffs. So I actually think that the industry is, at least on the consumer-facing side of the industry, it's prepared.

20:50Shayeza Walid: Yeah, it's more resilient. This is a conversation that's come up increasingly so, which is this idea of these long-term deals versus short-term deals when you think about the supply chain side of things. And I think there is more momentum in the conversations about the value for brands and suppliers in kind of investing in long-term contracts because of the amount of volatility geopolitically, economically. now whether or not that's going to take place and materialize is still kind of tbd but i think in situations like these it's important for brands to increasingly consider these kind of contractual terms because at the end of the day we realize that when you're looking at the supply chain everything feels is is more connected than it ever was and there was this idea of like hyper localization or you know as brian mentioned like renewable energy but all those things are still kind of in the process of being developed.

21:39Shayeza Walid: Not all of them have scaled yet. So I still think for any executive sitting in Europe or the US thinking about how this is going to impact the fashion supply chain, I think it's increasingly important to consider kind of local dynamics for their suppliers and where their clothes are being manufactured, because ultimately prices are going to get pushed up to consumers if they don't deal with it at that back end level.

22:00Cathaleen Chen: That's a great point. I'm going to partially agree with you, Kat. I agree that the fashion industry is much more resilient than it was in 2019, but there is this fundamental difference between something like tariffs or even COVID and an energy shock. You know, there's a certain physics involved. Like if you don't have oil, like the lights don't turn on and the factory machines don't run and the ships don't go. And it's almost unavoidable unless you make that, you know, renewables transition, which takes decades, you know, potentially. And so there's something a little different about this one, but I also don't think it's hit that level of tariffs or COVID yet where we all need to be freaking out either.

22:42Sheena Butler-Young: And I agree with everything that was just said. And I would just add, I would just add the human bit. I agree with everything that was just said. It was all great. And I would just add on the human bit of it. I think that, I think there is resilience in the corporate side and the supply chain side, but also that the energy shock is different. But I also think there's a human impact that's cumulative over, like, as a millennial, we've talked about, like, all the crises that we've lived through. And I just think that people are maybe not as resilient as we sometimes believe. I think people are hurting and that I think that's going to have a long-term mental health fallout that's hard.

23:18Sheena Butler-Young: It's hard to look at the news and have business as usual, I think, for a lot of people. I think that should not be underestimated. For sure.

23:26Brian Baskin: It's been actually really interesting being on this podcast with Chayez and Chayez and I working together on a story. This is the first time we've shared a byline. But it just struck me as how different our perspectives are where she is focusing with, you know, on the ground reporting, connecting with suppliers and manufacturers. And I have the luxury of being able to take a much bird's eye view, connecting with analysts that cover, you know, the retailers and the retailers themselves and just the difference between these perspectives. Right. Like you feel the crisis much closer on Cheyenne's end.

24:03Brian Baskin: and there's this remove on the end that I'm covering. And I think to your point, Sheena, it's important to look at this from that very human on the ground angle versus what are retailers gonna do when they lose profitability.

24:18Cathaleen Chen: Yeah, that's a wonderful point and a good note to end on as well, I would say. Shayza, Kat, first of all, dream team, first byline together, but I think this is an excellent story that you two did. Thank you so much for joining us today.

24:32Sheena Butler-Young: Thank you. Thanks, Brian. Thanks, Sheena. Please be sure to check out Shiza and Kat's coverage over at businessoffashion.com. These and other stories are available to BOF professional subscribers only, and you can find the links in the episode notes. You've been listening to The Debrief, produced and edited by Olivia Davies and Eric Bria. I'm Sheena Butler-Young.

24:50Cathaleen Chen: And I'm Brian Baskin. We'll be back next week with a new episode. Thanks so much for joining us, and be sure to follow us wherever you get your podcasts.

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25:38Shayeza Walid: Hablas espanol?

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