Market direction of Ceylon Tea amidst Middle East conflict

Ceylon Tea represents one of the main pillars of the vibrant trading relationship between Sri Lanka and the Middle East for decades. The consumers in the region display a strong preference towards the brew due to its strong and bold flavour, particularly from low-grown varieties. In 2025, four Middle East states were among Sri Lanka’s  top five tea export markets (by value) – Iraq (1), Turkiye (3), the UAE (4), and Libya (5).

Tea exports in 2026 started off impressively during January, registering 8.11% YoY growth to yield $ 121.84 million. The West Asian countries accounted for almost 45% of the tea export income last year. The industry was expecting a bright year before the hostilities began, however, that excitement has now disappeared and instead, the stakeholders of the sector are feeling anxious about how this unexpected crisis would affect the fortunes of the vital export crop.

The barter arrangement Sri Lanka was maintaining with Iran, by which tea was exchanged in lieu of $ 251-million crude oil import payment arrears, has now become nearly impossible to execute due to the physical blockade of trade routes and heightened banking sanctions owing to the ongoing turbulence. It is reported that warehouses are currently overloaded with tea cargo while some shipments are currently stuck or discharged at interim ports. Unfortunately, the war has disrupted major Middle East transit hubs like Dubai and Doha, affecting the speed and cost of reaching buyers in the region. The industry estimates revenue loss caused by the prevailing instability at about $ 10-15 million per week.

The crisis in the Gulf has underscored a fundamental shortcoming of the nation’s tea industry. For decades, the industry has been overly reliant on markets that are exposed to persistent political and economic turmoil. Economic sanctions against Russia, a prominent buyer of Ceylon Tea, have made it difficult for exporters to recover payments for shipments due to the exclusion of major Russian banks from SWIFT - the global banking system. On the other hand, US economic/financial embargoes against Iran have led to substantial depreciation of the Iranian Riyal, causing decline in purchasing power and lower overall demand for tea. Turkiye - another loyal customer of Ceylon Tea – experienced rapid decline in the value of its currency over the last few years, resulting in weakened buying capacity. Tea exports to Ukraine dropped by almost half over the last decade, as the East European state was damaged and undermined by the military aggression of its neighbour.

The current market landscape of Sri Lanka’s tea exports represents a noticeable evolution from the client base of Ceylon Tea in the 1960’s and 1980’s. In 1960, the top five markets were the UK, Australia, the USA, Iraq and South Africa (by volume). By 1985, the position of the UK had fallen to number five and 40 years later, the nation which introduced cultivation of tea to Sri Lanka purchased only a miniscule proportion of tea ($ 13.13 million) from its former colony.

Diversifying the market base of Ceylon Tea into politically and economically stable economies has become highly imperative given the socio-political volatility associated with key export markets of the commodity. The Sri Lanka Tea Board needs to undertake a comprehensive market study and launch a well-thought-out marketing strategy to popularise Ceylon Tea in non-traditional markets by focusing on politically and economically robust countries to strengthen the industry’s commercial interest. At a time of rising health-consciousness among consumers worldwide, antioxidant and heart-protective benefits offered by tea can be used to position it as a healthful beverage to gain a distinct competitive advantage.

Industry stakeholders together with policymakers need to think out of the box and adopt pragmatic, market-oriented strategies to ensure the sustainability and competitiveness of the industry without being dogmatic. Implementing futuristic and forward-thinking strategies would create a brighter future for Ceylon Tea, and hope this crisis would be an eye opener to the decision makers of the industry.