Disruptions to shipping through the Strait of Hormuz following the outbreak of the Iran war have tightened the global supply of petrochemicals and pushed plastics prices to near four-year highs, industry analysts and company executives said.
Rabobank estimates that roughly $20 billion to $25 billion worth of petrochemical products transit the Strait of Hormuz each year, a volume that market participants say highlights how prolonged interruptions would force producers to shift increased costs onto customers.
"Anyone who imports from the Middle East, which is pretty much everyone in the rest of the world to a certain extent, has lost a large supplier and is having to scramble to find replacement resin at extraordinarily higher prices," said Joel Morales of Chemical Market Analytics by OPIS.
The Middle East supplied more than 40% of polyethylene exports in 2025, with Saudi Arabia the leading exporter, and ships that material to almost every region outside North America, the next-largest exporting area. Since the onset of the conflict, prices for key plastics including polyethylene (PE) and polypropylene (PP) have climbed alongside rising crude and petrochemical feedstock costs.
Dow Chief Executive Jim Fitterling described the situation as a major disruption to logistics, saying that up to 50% of polyethylene supply is either offline, constrained or being impacted following the events in the Middle East.
Feedstock shock and its ripple effects
Analysts warned that a closure of the Strait could interrupt nearly 1.2 million barrels per day of global naphtha export flows, further tightening the feedstock available for petrochemical production. The war has lifted Asia's naphtha refining margin to above $400 a ton over Brent crude, from roughly $108 a ton before the conflict, according to LSEG data.
Maksim Sonin, an energy executive at Stanford University's Center for Fuels of the Future and Hydrogen Initiative, said the jump in prices reflects an increasing "risk premium," noting that Asia is especially vulnerable because the region relies heavily on naphtha as a primary feedstock for plastics production. Countries cited as particularly exposed include Japan, South Korea and India due to their dependence on imported crude and petrochemical inputs.
Regional winners and losers
Plastic makers in Asia and Europe, which depend heavily on imported feedstocks and Middle East-sourced materials, are seeing tighter margins as input costs rise. In Europe, companies face rising feedstock and import costs, and surging naphtha prices have created a disconnect with contract pricing, making it hard for producers to immediately pass on higher costs, LyondellBasell said.
By contrast, North America appears relatively advantaged because much of its plastics production is based on natural gas and related feedstocks rather than naphtha. Agustin Izquierdo, chief financial officer of U.S.-based petrochemicals maker LyondellBasell, said prices for PE and PP, along with oxyfuels linked to crude, have increased substantially since the conflict began, and that April order books are the strongest in several months despite the higher prices.
"It's becoming obvious that North America is an advantaged region in terms of feedstock, and we'll continue to take advantage of that going forward," Izquierdo said. The U.S. Energy Information Administration notes that plastics production in the U.S. is largely based on natural gas feedstocks, unlike much of the rest of the world where naphtha predominates.
Utpal Sheth of Chemical Market Analytics by OPIS added that with more than 50% of U.S. polyethylene output exported, American producers are seeing what he described as "super-normal" profits.
Higher costs flow to customers
Producers are moving to pass elevated input and transport costs to customers. Celanese has implemented price increases across its engineered materials and acetyl lines, while Dow plans to raise polyethylene prices in March and April. European firms including BASF and Wacker Chemie are also increasing prices to offset higher raw material and shipping expenses.
Germany's Lanxess has implemented steeper hikes in some specialty products, raising prices for flame retardants and other additives by up to 35%, and increasing plasticizer prices by as much as 50%, citing persistent cost pressures.
Some downstream businesses are already reacting. India’s largest bottled water company, Bisleri, has raised retail water prices by 11%, a move that puts additional strain on customers where access to clean drinking water varies. Ecolab, a provider of water solutions, said it will impose an energy surcharge of 10%–14% starting in April, attributing the measure to higher operating costs.
Industry observers warn that sustained higher input costs for petrochemical manufacturers could weigh on demand for discretionary goods, reinforcing broader inflationary pressures.
Sonin added that the plastics market could see consolidation over time, with production concentrating among larger, lower-cost producers, though he framed that as an outcome of the current price environment rather than a certainty.