Global cotton markets turn volatile amid escalating Iran-US-Israel conflict

• Oil price surge, geopolitical tensions inject uncertainty into cotton, textile trade
• Higher polyester costs may lift cotton demand but cautious sentiment caps upside

Global cotton markets have entered a volatile phase as the escalating Iran-US-Israel conflict begins to influence energy markets, logistics, and broader commodity sentiment. While cotton fundamentals remain largely driven by supply, the geopolitical situation in the Middle East is adding a macro-risk premium to markets, affecting prices, trade flows, and textile demand expectations across major consuming countries.

The immediate trigger came after coordinated military strikes by the United States and Israel on Iranian targets, which sharply raised tensions across the Middle East. The conflict quickly impacted energy markets, pushing crude oil prices higher amid fears of supply disruptions through the Strait of Hormuz, one of the world’s most critical oil transit routes. Higher oil prices are significant for cotton because they increase the cost of producing synthetic fibres such as polyester. When polyester becomes more expensive, cotton typically becomes relatively more competitive in the global textile industry, which can support cotton consumption.

However, the broader macro environment has turned cautious. Rising geopolitical uncertainty has led to volatility across financial markets and currencies, prompting textile manufacturers and traders to remain conservative in their purchasing decisions. Spinning mills in major consuming regions, including Asia, are closely monitoring demand conditions before committing to large forward purchases. This cautious buying behaviour has limited immediate upside in cotton prices despite the supportive energy market dynamics.

Recent cotton market activity reflects this mixed sentiment. According to the PCCA Cotton Market Weekly report, ICE cotton futures traded in a narrow range during the week, with the May contract closing at 65.61 cents per pound, slightly lower on a weekly basis. Despite active trading, markets lacked a clear directional trigger as traders balanced macroeconomic risks with evolving supply-demand signals.

On the demand side, global export sales remained relatively steady, but shipments continued to lag expectations. Net sales of Upland cotton (the most widely produced and traded variety of raw cotton in the world) reached around 253,200 bales in the last week of February, while US shipments remained below the pace required to meet the USDA’s 12 million bale export target for the marketing year (1 August-31 July). As of February, US export commitments currently stand at roughly 77% of the projected annual total, still below the five-year average and highlighting the need for stronger shipments in the coming weeks.

At the same time, speculative activity in futures markets has started to shift. Funds that previously maintained sizeable net short positions have begun partial short covering, indicating that traders are adjusting positions amid rising geopolitical risk. Meanwhile, growers have used recent price strength to fix previously unfixed sales, which has also added selling pressure in the market.

Looking ahead, the trajectory of cotton markets will largely depend on the duration and intensity of the Middle East conflict. Sustained high oil prices could improve cotton’s competitiveness against synthetic fibres and support global consumption. However, prolonged geopolitical instability may weaken textile demand and disrupt trade logistics, keeping cotton prices range-bound in the near term. For ginners, spinning millers, and brokers, developments in energy markets, freight costs, and export shipments will remain the key indicators shaping cotton price direction in the coming weeks.