As geopolitical tensions in the Middle East continue to escalate, the future of the Strait of Hormuz—a vital chokepoint for global energy and chemical shipments—remains uncertain, transforming a regional crisis into a systemic shock to global supply chains.

Starting with crude oil, and extending from basic raw materials such as ethylene and propylene to downstream polymers like polyethylene (PE) and polypropylene (PP), and further to specialized products such as ethylene glycol (EG) and PVC, a widespread wave of “force majeure” is spreading across Asia, Europe, and North America.

Petrochemical Raw Materials:

Import “lifelines” cut off, alternative channels blocked

The Middle East is not only a hub for energy exports but also a major global production base for petrochemical feedstocks. Disruptions to shipping through the straits connecting the Persian Gulf will directly impact the market supply of various basic chemical products. According to Morgan Stanley’s latest force majeure tracking report released on March 13, since the outbreak of the conflict, force majeure declarations for major global chemical products have shown a chain reaction spreading across regions and product categories.

The olefins industry chain has been hit hardest by this round of disruptions. As of March 12, 3.9% of global ethylene capacity and 3.2% of propylene capacity were under force majeure. Regionally, the impact is most concentrated in Southeast Asia and Central Europe: 20.4% of Southeast Asia’s ethylene capacity has been affected, while in Central Europe the figure reaches a staggering 60.2%.

Meanwhile, force majeure declarations are rapidly spreading downstream along the supply chain. According to Morgan Stanley data, 1.4% of global polyethylene capacity and 1.0% of polypropylene capacity are currently under force majeure. Companies such as Formosa Plastics in Taiwan, LyondellBasell, The Polyolefins Company (TPC) in Singapore, and PT Chandra Asri Pacific Tbk in Indonesia have all declared force majeure on their polyolefin products.

Local production facilities in the Middle East have also suffered direct impacts. On March 2, Qatar Energy announced that its entire 7.74 million metric tons per year (mt/y) LNG operation at the Ras Laffan Industrial City had entered force majeure status due to production stoppages following attacks on the facilities. Kuwait’s EQUATE announced that its 1.15 million mt/y ethylene glycol operation had entered force majeure; Saudi Arabia’s Sadara Chemical Company announced supply disruptions for its ethanolamine and ethylene glycol ether products.

Underlying this supply crisis is the international market’s heavy reliance on Middle Eastern chemical products. The Middle East accounts for approximately 35% of global polyethylene capacity and 28% of polypropylene capacity; the disruption of its exports has directly resulted in a monthly supply shortfall of nearly 3 million metric tons in the international polyolefin market.

Expectations of supply disruptions have quickly been reflected in prices. The North American spot market set the tone: spot prices for ethylene rose 24.0% compared to the last week of February, North American propylene increased by 12.8%, and North American polypropylene spot prices surged by 25.0%.

Aluminum Industry:

9% of Global Capacity Under Strain, U.S. Buyers in Panic

If oil is the lifeblood of industry, then aluminum is its backbone. The Middle East is a critical link in the global aluminum supply chain. By 2025, the region’s total primary aluminum capacity is projected to reach 6.92 million metric tons, with actual production at 6.85 million metric tons, accounting for 9% of global supply. The region’s aluminum industry is highly sensitive to shipping security in the Strait of Hormuz, with both raw material imports and finished product exports facing dual threats.

On March 3, a Qatari aluminum plant suspended operations following an attack on its facilities; its annual capacity of 648,000 metric tons accounts for 0.82% of global output. The following day, Bahrain Aluminum announced a force majeure-induced shutdown; its annual capacity of 1.6 million metric tons accounts for 2% of global output. As a result, approximately 30% of the Middle East’s primary aluminum capacity has been substantially impacted.

The suspension of deliveries by smelters means that some of the aluminum originally intended for export may not reach the international market on schedule, which has directly driven up spot and futures prices. LME aluminum prices have climbed to a nearly four-year high of $3,544 per ton. If the conflict continues to escalate, local aluminum smelters in the Middle East may be forced to cut production due to product backlogs and cash flow issues, creating a mismatch where “exports are unsold while imports are in short supply,” which would further drive up international aluminum prices.

This supply crisis is rapidly spreading to the consumer end, particularly in the United States, where there is a strong demand for aluminum. Due to the uncertainty in Middle Eastern supply, U.S. importers are urgently seeking new sources of supply. Market sources indicate that some U.S. buyers have already begun sourcing alternative aluminum supplies from Asia to ensure the stability of their production chains. This shift suggests that global aluminum trade flows may undergo adjustments in the short term.

Building Materials and Chemical Fibers:

The “Final Link” in Cost Pass-Through

The skyrocketing prices of upstream raw materials are relentlessly spreading through the production and supply chain to every corner of the industry. Affected by the U.S.-Israel-Iran conflict, prices of key raw materials required for building materials production have surged dramatically compared to the beginning of the year: acrylic acid has risen by 134.8%, polyethylene by 29.2%, and PVC by 26.4%.

The pressure is particularly acute in the construction formwork industry. The Middle East is the primary global producer of basic chemical raw materials such as formaldehyde and methanol; the unstable situation there has directly led to an 8% to 12% increase in the cost of key adhesives like urea-formaldehyde and phenolic resins. Meanwhile, security threats in the Strait of Hormuz have forced a large number of shipping vessels to take detours, causing freight rates to rise by over 40%, while marine insurance premiums have skyrocketed by 300% to 500%. Several construction formwork manufacturers have been compelled to issue price adjustment notices.

For the past two weeks, the skies over the Strait of Hormuz have been filled with smoke of conflict, and the Houthi rebels in Yemen resuming military strikes against Israel has further complicated the situation. For the global manufacturing sector, the only certainty is that the cost increases and supply chain restructuring triggered by this turmoil are just beginning to reveal their far-reaching impact.

Morgan Stanley notes that given the highly fluid nature of the conflict, current tracking may not fully capture all ongoing production halts. If the conflict persists and the Strait of Hormuz remains impassable for an extended period, capacity utilization rates in the Middle East and Asia could decline further, and actual production losses will continue to expand—straining an already pressured global supply chain and signaling the emergence of a new, even greater crisis.

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