The Iran war has exposed critical gaps in Australia’s sovereign capability, disrupting supply chains for liquid fuel, manufacturing chemicals, and textiles. While national policies prioritize defense and energy, local manufacturers are now struggling with extreme price volatility and raw material shortages for essential goods used by emergency services and healthcare providers.
LoomTex and the Yarn Pricing Crisis
For Geelong textile manufacturer LoomTex, the geopolitical instability in the Middle East has created a paradoxical environment of increased demand and operational chaos. ABC News reported that the company has seen a surge in inquiries as businesses seek to localize their supply chains, but the cost of doing so is becoming unpredictable.
The primary bottleneck is the lack of domestic wool and cotton spinning, the only step of textile manufacturing not available within Australia. This dependency leaves local firms at the mercy of international mills where pricing has shifted from monthly stability to hourly fluctuations.
“If I tender to three different spinning mills for yarn, they’ll normally say to me, ‘OK, here’s this price. It’s valid for 30 days,’ Now that’s three hours.”
Samantha Van Zyl, CEO of LoomTex
This volatility threatens the development of critical equipment. LoomTex previously developed a bespoke fiber for emergency service workers, but securing the raw materials for such innovations is now a high-risk gamble. When pricing windows shrink to hours, long-term strategic planning for national resilience becomes nearly impossible.
Defining Sovereign Capability Beyond Defense
In policy circles, “sovereign capability” is frequently treated as a synonym for defense procurement or energy independence. However, the current crisis suggests a much wider vulnerability. It is not just about missiles and power grids; it is about the chemicals, plastics for food packaging, and textiles that keep a society functioning during a blockade or war.
According to Sam Delgos of the Australian Fashion Council, the pandemic provided an early warning of this fragility when the nation found it could not rely on foreign partners for basic medical PPE.
Sam Delgos, General Manager of the Australian Fashion Council
The shift is a reaction to a decade of disruptions, including volatile US tariff policies and the COVID-19 pandemic. While local manufacturers successfully pivoted to supply healthcare and emergency services during 2020, the Iran war has highlighted that these pivots are temporary fixes rather than structural safeguards.
The Legacy of Liquid Fuel Insecurity
The current supply chain failure is not a surprise to security analysts; it is the realization of a long-documented risk. Australia’s reliance on imported liquid fuel has been a point of contention for over a decade, characterized by a cultural tendency to assume global markets would always remain stable.
As the Australian Institute of Company Directors (AICD) noted, warnings about this dependence date back to at least 2013. A report by John Blackburn for the NRMA explicitly criticized the nation’s lack of refining capacity and small stockholdings.
Blackburn argued that Australia had adopted a “she’ll be right” approach to fuel security, relying on historical performance rather than preparing for the weaponization of economic chokepoints. This sentiment was echoed by Engineers Australia in 2014, which described liquid fuel insecurity as a “wicked problem” threatening national security and social stability.
The government’s response has been fragmented. A Liquid Fuel Security Review was announced in March 2018, with an interim report following in 2019. However, the draft final report prepared in 2020 was never formally published, derailed by the pandemic. That unpublished document warned that liquid fuel is the backbone of the economy, underpinning everything from grocery deliveries to emergency services.
The Risk of Policy Blind Spots
The danger now is that the government may continue to prioritize high-profile sectors like defense while ignoring the “invisible” dependencies that support them. A defense force is useless if the chemicals required for its equipment or the plastics required for its food supply cannot be sourced locally.
The current state of Australian manufacturing can be summarized by a tension between opportunity and complexity. As Samantha Van Zyl noted, the war has “triggered this activation of demand and opportunity for localisation,” but it has arrived with an “extra layer of complexity” that makes execution difficult.
The next 30 days will likely see more manufacturers attempting to lock in long-term contracts to avoid hourly price swings, but without government intervention to address the “missing links”—like domestic spinning mills—these efforts remain fragile. The transition from a “just-in-time” global model to a “just-in-case” sovereign model requires more than just a desire to localize; it requires the industrial infrastructure to make that localization viable.
