The ongoing tensions in Iran are sending shockwaves through global energy markets, and this ripple effect has now reached Southeast Asia's textile industry. Cambodia's garment sector recently disclosed that transport costs for textiles have surged by 20% year-on-year due to soaring fuel prices. Behind this figure lies a fragile balance between geopolitical risks and manufacturing cost structures that is now being disrupted.
Background
Heightened tensions between Iran and Western nations have caused significant volatility in international crude oil prices during the first quarter of 2025. Brent crude briefly surpassed the $90 per barrel mark, rising about 15% from the start of the year. For Cambodia, a country heavily dependent on imported fuel, this change directly impacts logistics—whether it is moving raw materials from ports to factories or shipping finished garments to export hubs, transport costs have risen markedly.
The Garment Manufacturers Association in Cambodia had previously warned that fuel costs account for 30% to 40% of total transport expenses, while transport itself represents 5% to 8% of total product costs. The current 20% increase in transport costs means final product costs will rise by approximately 1% to 1.6%. In an industry where profit margins are typically in the single digits, such cost pressure cannot be ignored.
Industry Impact
The rising transport costs are reshaping the competitive landscape for Cambodia's textile industry. Compared with neighboring countries like Vietnam and Bangladesh, Cambodia already has relatively weak logistics infrastructure and a heavy reliance on road transport. When fuel prices climb, the price disadvantage of Cambodian exports becomes more pronounced.
For buyers, the competitiveness of Cambodian suppliers' quotes is being tested. Some international brands may reassess order allocation, shifting some volume to regions with lower transport costs. Meanwhile, Cambodian factories are seeking countermeasures, such as optimizing transport routes, increasing container utilization rates, or signing long-term contracts with logistics providers to lock in prices.
From a broader perspective, this event highlights the vulnerability of textile supply chains to energy prices. In recent years, the global textile industry has weathered multiple shocks including the pandemic, trade frictions, and raw material price hikes. The rise in energy costs driven by geopolitics is yet another variable that cannot be ignored. The industry needs to build more resilient logistics networks, for example by increasing rail or sea freight alternatives to reduce overdependence on road transport.