A deepening geopolitical crisis is choking Sri Lanka’s tea exports, triggering shipment paralysis, rising costs, and mounting losses that threaten the survival of one of the country’s most vital industries.
Sri Lanka’s tea industry is facing one of its most severe disruptions in recent history as the ongoing conflict in West Asia continues to destabilize global shipping routes. What began as delays in transit has now escalated into a full-scale crisis, with exporters struggling to move goods and maintain access to key international markets. For an industry valued at 1.5 billion dollars annually, the consequences are both immediate and far-reaching.
The situation worsened significantly after the US Israel strike on Iran on February 28, which intensified tensions across the region. The Red Sea, once a vital artery for global trade, has become increasingly volatile, while major transit hubs such as Dubai and Doha are experiencing disruptions that ripple across supply chains. Sri Lanka’s tea exports, which depend heavily on these routes, are now caught in a complex web of logistical challenges and geopolitical uncertainty.
Ceylon Tea has long maintained a strong presence in West Asia, the CIS region, and parts of Europe and East Asia. However, many of these markets are now directly or indirectly affected by the conflict. Industry leaders estimate that up to 60 to 70 percent of Sri Lanka’s tea exports are impacted due to instability across the Gulf and North African regions. This has created a situation where high-value teas are becoming increasingly difficult to sell, while warehouses at the Port of Colombo are rapidly filling with unsent cargo.
The financial impact has been swift and painful. Iran, a key buyer under the tea for oil barter system, has become an unreliable partner as sanctions tighten and trade routes are disrupted. Even though the volume of tea exported to Iran may not be the largest, its influence on global pricing is significant. With Iranian demand weakening, prices have corrected sharply, affecting producers across the country.
At the first tea auction following the escalation of conflict, prices fell by 4.3 percent, while the volume sold dropped by 13.1 percent. This downturn has also affected investor confidence, with shares of major tea companies declining by as much as 30 percent. Exporters describe the current situation as a complete blockage rather than a delay. Tea is being purchased, processed, and packaged, but cannot be shipped. As a result, storage facilities are nearing capacity, raising concerns about operational sustainability.
The cost of doing business has also risen dramatically. With traditional shipping routes through the Strait of Hormuz and the Suez Canal under threat, vessels are being rerouted around the Cape of Good Hope. This diversion adds between 15 and 20 days to delivery times, increasing fuel consumption and disrupting supply schedules. For a product like tea, where timing and freshness are critical, these delays can reduce market value and buyer confidence.
Insurance premiums have surged sharply as ships navigate high-risk zones. Rates that once stood at a fraction of vessel value have multiplied several times, while additional war risk and emergency surcharges imposed by global shipping lines are pushing costs even higher. Exporters are often forced to absorb these expenses to remain competitive, leading to estimated weekly losses between 10 million and 15 million dollars for the tea industry alone.
Adding to the strain, shipments already in transit are facing delays and payment uncertainties. In some cases, exporters are being asked to retrieve cargo independently from intermediate ports, further increasing costs and complexity. The tea for oil barter agreement with Iran, once a strategic solution to bypass financial sanctions, has now become nearly impossible to execute due to physical and financial barriers.
This crisis arrives at a time when Sri Lanka’s tea industry is already dealing with structural challenges, including outdated labor systems, rising production costs, fuel shortages, and the growing impact of climate change. The convergence of these issues with a global geopolitical shock has placed the industry in an extremely vulnerable position.
If the current situation persists, Sri Lanka risks not only losing immediate revenue but also damaging long-standing trade relationships that have taken decades to build. The tea industry now stands at a critical crossroads, where recovery will depend not only on internal resilience but also on the stabilization of global trade routes and geopolitical conditions.
