The ripple effects triggered by the disruption of shipping through the Strait of Hormuz are rapidly spreading across the entire petrochemical industry chain. Since the outbreak of the conflict in the Middle East, prices for basic chemical products such as plastics and polymers have surged to their highest levels in nearly four years. The impact on the petrochemical supply chain is spreading to the end-user market, and the global supply of chemicals has tightened significantly. From auto parts to toy packaging, the consumer goods sector is facing widespread pressure for price increases.

Blocked Middle Eastern Exports Disrupt Global Supply Chains

The Middle East plays a pivotal role in global petrochemical trade. In 2025, the region accounted for over 40% of global polyethylene exports, with Saudi Arabia as the largest exporter, shipping products to nearly every region except North America. Following the disruption of shipping through the Strait of Hormuz, export channels for Middle Eastern petrochemical products have become severely congested, directly leading to a sudden tightening of the global supply landscape

Supply disruptions were quickly reflected in market prices. Since late February, polyethylene prices in East Asia have risen by nearly 37%, while polypropylene prices have surged by over 38%. Joel Morales of the chemical market analysis firm OPIS noted that nearly all regions importing Middle Eastern products are scrambling to find alternative resins but are forced to accept exceptionally high prices. Jim Fitterling, CEO of Dow Chemical, stated that global logistics have become highly uncertain, with up to 50% of polyethylene supply either halted or restricted.

Caught between supply shortages and panic buying, the global petrochemical market has fallen into a state of tension marked by supply-demand imbalance. Asia has been hit hardest. Major importing nations such as Japan, South Korea, and India, which rely heavily on Middle Eastern petrochemical products, are facing the dual impact of raw material shortages and soaring prices. The European market has also been affected; although some imports can be redirected to the United States, extended shipping times and rising costs make it difficult to fully offset the supply gap.

Costs Soar, Profits Squeezed

As an upstream feedstock in the petrochemical industry chain, the naphtha market has been the first to feel the impact. The closure of the Strait of Hormuz could disrupt nearly 1.2 million barrels of daily global naphtha exports, directly tightening the supply of raw materials for plastic production. Data from the London Stock Exchange shows that the cracking margin for Asian naphtha relative to Brent crude has surged from $108 per ton before the conflict to over $400, more than tripling and reaching a historic high.

Maxim Sonin, an energy expert at Stanford University’s Center for Future Fuels and Hydrogen, noted that the price surge reflects rising risk premiums. Asia, due to its heavy reliance on imported naphtha as a key raw material for plastic production, has become the most vulnerable region. This raw material structure stands in stark contrast to North America. U.S. plastic production primarily relies on abundant domestic natural gas resources and is less affected by fluctuations in the naphtha market.

The sharp rise in raw material costs is being passed down through every level of the supply chain. Asian petrochemical producers face the dilemma of continuously shrinking processing margins, with some companies already operating at a loss. Utilization rates for naphtha-based cracking units have generally been reduced, further exacerbating supply tightness for downstream plastic products. Meanwhile, European producers are also grappling with the challenge of a disconnect between raw material costs and contract pricing, making it difficult to effectively pass on cost pressures to customers, and their profit margins are being continuously squeezed.

Significant Regional Divergence and Intensifying Inflationary Pressure

Amid this supply chain crisis, the fortunes of the petrochemical industry have diverged significantly across different regions. North America has emerged as a relative beneficiary due to its raw material advantages. Data from the U.S. Energy Information Administration shows that U.S. plastic production relies primarily on natural gas and related feedstocks, with over 50% of polyethylene destined for export. Utpal Sheth of OPIS noted that U.S. producers are enjoying “supernormal profits,” with their export competitiveness significantly enhanced.

Meanwhile, global chemical companies are accelerating efforts to pass cost pressures down the supply chain. Celanese has raised prices for its engineering materials and acetyl product lines, while Dow Chemical plans to increase polyethylene prices in March and April. European firms BASF and Wacker Chemie are also adjusting prices to offset rising raw material and transportation costs. Germany’s Lanxess has implemented even more substantial price hikes, raising prices for specialty additives such as flame retardants by 35% and plasticizers by as much as 50%.

The end-consumer sector is already feeling the pressure of these price hikes. From basic chemicals to consumer goods, price increases are being passed down the supply chain, exacerbating global inflationary pressures. Soning pointed out that the plastics market may undergo a round of consolidation, with production capacity concentrating among larger, lower-cost manufacturers, leading to a profound reshaping of the industry landscape.

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