Insights from industry leaders on how escalating tensions in the Middle East may disrupt global logistics, energy prices, and goods demand, and what this may mean for Vietnam’s key export sectors.

Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (VITAS)

The conflict in the Middle East was not something we anticipated. Vietnam’s textile and garment industry has begun to clearly feel its impact, and we expect it will affect the stability of orders. Three major challenges are currently confronting the industry.

First is cost pressure, particularly transport costs. Some international brands have started recalculating their production cost structures in Vietnam. The issue is not only the cost of manufacturing but also logistics costs, as shipping routes linked to the Middle East carry increasing risks. If shipping flows are disrupted or transit times lengthen, the entire supply chain will be affected.

Second is the challenge of market stability. When geopolitical tensions escalate, global consumer sentiment can be easily affected. There is a possibility that consumers will tighten spending, particularly on apparel, which is not considered an essential item. This could directly affect orders for Vietnamese textile and garment enterprises in the coming months.

Third is the risk stemming from oil price volatility. If oil prices rise, a range of input costs will increase accordingly, especially products derived from petroleum, such as synthetic fiber and yarn. Synthetic fiber products currently account for 40-45 per cent of the industry’s production structure.

We are closely monitoring developments to provide timely guidance and share updates with businesses, as the situation will certainly affect order stability in March and April and may extend through June.

To respond to these fluctuations, enterprises have proactively engaged with the Association and are focusing on several groups of solutions. These include recalculating production plans and cash flows. Companies are working with banks to restructure their finances while also seeking alternative shipping solutions in case routes through the Middle East are disrupted. This is considered an urgent issue, as extended delivery times could lead to the risk of contract violations.

At the same time, businesses are reviewing their internal operations to cut costs. As transport costs trend upward, companies must optimize production processes, reduce waste, and improve workplace productivity to offset rising expenses.

Enterprises must also improve their ability to adapt to customer requirements. In times of uncertainty, international partners often tighten requirements on both pricing and delivery timelines. Companies may have to accept a certain level of risk.

If vessels are unable to pass through normal shipping routes and must detour via southern Africa, transit times will lengthen and costs will rise significantly. In that case, the ability to coordinate production and ensure on-time delivery will become a decisive factor.

Mr. Bui Ngoc Bao, Chairman of the Vietnam Petroleum Association

Conflicts in the Middle East inevitably affect global oil prices, as the region supplies 30-40 per cent of the world’s oil. In particular, any blockade or disruption in the Strait of Hormuz represents a major risk that must be closely monitored. However, in my view, the current impact is still largely psychological, given that the situation has only unfolded over a short period.

In reality, fuel prices are not determined solely by supply and demand but are also strongly influenced by financial speculation. Around 95 per cent of current transactions are non-commodity trades, which leads to what can be described as “virtual pricing.” Ultimately, however, prices tend to return to levels that reflect the pace of economic growth, typically fluctuating around $70 a barrel.

Looking back at the price volatility in 2022 during the Russia-Ukraine conflict, when domestic fuel prices surged, I can affirm that Vietnam did not face an oil shortage. The real difficulty lay in the lack of flexibility in the regulatory mechanism, which caused businesses to incur heavy losses and made it impossible for them to continue selling fuel.

At present, low discount margins are placing many retailers, particularly private ones, under significant pressure, and they have been voicing concerns for months. This is essentially a domestic regulatory issue rather than a direct impact of the conflict involving the US, Israel, and Iran.

Therefore, to ensure energy security and market stability under all circumstances, it is necessary to quickly address regulatory bottlenecks so that businesses are not forced to operate at a loss, thereby maintaining a natural supply flow to the market. At the same time, the government should promptly issue and implement the new decree on petroleum trading to allow the market to operate under proper market-based pricing mechanisms. Though the necessary procedures have been completed, the signing and promulgation of the decree have been delayed.

It is also important to diversify supply sources by lowering import tariffs on fuel from other regions to match ASEAN preferential rates, which are currently lower by about 7-8 per cent. This would make it easier for businesses to access supplies from outside the region.

National reserves should also be strengthened. Instead of maintaining a stabilization fund in cash, which can be inefficient, these resources should be used to build centralized oil reserves. Maintaining reserves equivalent to 5-20 days of supply would help the country respond more effectively to sudden market fluctuations.

At the same time, Vietnam needs to strengthen its energy self-reliance. Though the country can meet around 70 per cent of its refining demand, domestic crude oil production only accounts for about 30 per cent of feedstock supply. Refineries such as Nghi Son still have to import crude oil from Kuwait through maritime routes that carry potential risks.

Ms. Le Hang, Deputy Secretary-General of the Vietnam Association of Seafood Exporters and Producers (VASEP)

The Middle East is currently a major market for salmon, shrimp, tuna, and many high-value seafood products imported from Asia, Europe, and the Americas.

Tensions in the Middle East are creating serious disruptions to seafood supply chains, a sector that requires strict control of temperature and timing. As airspace restrictions tighten and flight schedules are disrupted, supplies of fresh seafood transported by air have quickly become scarce, forcing importers to shift towards frozen products. However, this transport channel is also facing difficulties as bookings for refrigerated containers are increasingly limited or temporarily suspended.

In Dubai, Jebel Ali Port, operated by DP World, serves as a major seafood transshipment hub in the region. When vessels are forced to reroute, longer transit times and increasing vessel queues raise the risk of port congestion and shortages of electrical plug-in points for refrigerated containers. As a result, storage and demurrage costs rise sharply, while the risk of product quality deterioration also increases if storage times exceed safe limits.

For Vietnamese exporters, particularly those shipping pangasius (catfish) and shrimp, longer transit times of one to two weeks significantly increase electricity costs, as temperatures in refrigerated containers must be maintained. At the same time, the extended journey raises the risk of disputes over product quality.

Price impacts are already visible at two levels. At the regional level in the Middle East, rising transport and insurance costs directly push up import prices. Fresh and chilled seafood may face localized supply shortages, especially in the premium restaurant and hotel segment, potentially leading to higher retail prices and menu prices.

At the global level, the extent of the impact will depend on how long the crisis lasts. If the share of containers passing through the Strait of Hormuz remains relatively small compared with total global shipping volumes, the broader container price environment may remain manageable. However, for companies with direct trade ties to the Middle East, higher shipping costs may force them to restructure markets, redirect exports, or renegotiate contracts.

Given that the Middle East is a relatively high-margin market for pangasius and several value added seafood products, sharply rising logistics costs could alter the profit structure across the entire supply chain.

Future scenarios for the seafood market will largely depend on security developments. If tensions ease, shipping lines may restore routes through the Strait of Hormuz and gradually reduce risk surcharges, allowing supply chains to recover quickly. Conversely, if risks persist, elevated transport costs may become a “new normal,” leading to broader price volatility.

In this context, VASEP recommends that Vietnamese seafood companies diversify shipping routes to avoid dependence on a single maritime corridor, increase inventory at regional cold storage facilities, particularly at major transshipment hubs, and prioritize long-term freight contracts to reduce exposure to volatile spot markets. At the same time, businesses should closely monitor developments in maritime insurance and shipping line policies in order to proactively adjust negotiations and export plans.

Source: VnEconomy

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