![Massive export volumes of chemicals and plastics go through the Strait from Saudi Arabia, Qatar, the United Arab Emirates (UAE) and Kuwait with key destinations being China, the rest of Asia and the EU. "Around 84% of Middle East polyethylene (PE) capacity relies on the Strait of Hormuz for waterborne exports, without accounting for eastern Saudi sites sending PE inland to their western ports," noted Harrison Jacoby, director of PE at ICIS. While Saudi Arabia has ports on the Red Sea in the west, its key petrochemicals hub is in Al Jubail in the Persian Gulf where exports go through the Strait. The UAE’s major ports are also mostly on the Persian Gulf, although the Port of Fujairah is on the Gulf of Oman further south. The constraints on chemicals and plastics exports, along with key feedstock naphtha, will curtail availability and pressure prices higher on a global basis. Also lifting chemicals prices will be the surge in crude oil prices. Roughly 80% of Asia’s seaborne naphtha import demand in 2025 is covered by Middle East supply, according to ICIS data. Should disruptions in the Strait of Hormuz persist, feedstock availability for some Asia crackers could come under strain. While certain crackers can increase the share of liquefied petroleum gas (LPG) in their feedstock mix, this flexibility is limited, said ICIS senior analyst Doris He. Disruptions to Middle East propane supply would also raise feedstock costs for propane dehydrogenation (PDH) units and further compress propylene margins, said ICIS senior analyst Joey Zhou. For US producers, the impact on demand could outweigh any benefits from constrained Middle East supplies. “Higher geopolitical risk for energy prices likely shift focus to risks for margins, volumes and capex decisions. Excess capacity in petrochemicals suggests demand risk outweighs spread arbitrages,” said Laurence Alexander, US chemicals analyst at Jefferies, in a research note. Methanol, PE, EG and PP key exports However, Canada-based Methanex could benefit from a methanol supply shock, he noted. Methanol is Iran’s top chemicals export at well over 9 million tonnes in 2025, according to the ICIS Supply and Demand Database. Saudi Arabia also exported nearly 4 million tonnes of methanol. Shares of Methanex rose around 4% in afternoon trading on 2 March. Along with methanol, PE is the other top export from the Middle East, along with ethylene glycol (EG) and polypropylene (PP), according to the ICIS Supply and Demand Database. US EG prices will likely see upward price pressure in the short term as a result of the increase in Asia spot prices, coupled with an expected increase in demand for exports as a result of the closure of the Strait of Hormuz. With the closure of the Strait, exports from Kuwait and the port of Al Jubail in Saudi Arabia are impossible, according to EG market players. There are production sites on the west coast of Saudi Arabia in Yanbu but ongoing Yemen- based Houthi militant threats make shipments risky in the Red Sea as well. China is the key recipient of PE, EG and methanol volumes from the Middle East but is self- sufficient in PP, while southeast Asia is a key destination for imports of PE and PP. Significant volumes of PE and PP also go to the EU and India. The Middle East exported over 12.5 million tonnes of PE in 2025 out of nearly 17 million tonnes of polyolefins, along with nearly 14 million tonnes of methanol and nearly 6.5 million tonnes of EG, according to the ICIS Supply and Demand Database. US can help fill the gap The US is a major exporter of PE to the tune of around half of total production, and can thus play a key role in plugging the gap with increased exports to Europe and Asia. EG is also a key US export. "The US can certainly help fill gaps from potential Middle East supply disruptions and would welcome the opportunity as the potential of a highly restrictive antidumping duty [ADD] of $734.32/tonne on US PE by Brazil has significantly reduced recent shipments to the country, who was the third largest importer of US PE in 2025," said ICIS's Jacoby. "The US is seeing production costs move lower this month, supporting strong production rates. However, the US would fall short of completely backfilling 100% of Middle Eastern exports if such an extreme outcome were to become reality," he added, pointing out that the Middle East is the leading exporter of PE globally. The global PE market is still facing overcapacity and is forecast to grow increasingly long until 2029, the ICIS analyst noted. "The capacity exists in the market today outside of the Middle East. However, it is in regions with higher cost structures," said Jacoby. "Clearly a complete switch from existing Middle Eastern supply chains is not something that happens overnight and grade slates will vary but necessity is the mother of invention should the situation become that dire," he added. Meanwhile, European chemicals prices are poised to rise. For example, European PE/PP producers have gone from separately looking for a €30-50/tonne increase for March contracts to separately offering triple-digit increases. US producers of olefins and polyolefins using shale gas feedstock will become even more cost-advantaged on a relative basis as crude oil prices rise. “We typically focus on the oil-gas spread as the key driver of petrochemical margins,” said Alexander from Jefferies. He estimates that every $5/barrel move in oil prices, all else being equal, would add around $250 million to earnings before interest, tax, depreciation and amortization (EBITDA) for LyondellBasell, around $500 million for Dow and around $150 million for Methanex. Demand risk from economic impact The key risk to global economies and thus the demand side for chemicals is a prolonged period of elevated crude oil and natural gas prices, alongside overall geopolitical turmoil. “We assume the conflict continues through March, in line with recent political statements, and that the Strait of Hormuz remains unofficially restricted in the near term. This is expected to tighten crude and refined product markets materially, particularly for major Asian importers such as China, India, Japan and South Korea, which rely heavily on Gulf supplies,” said Ajay Parmar, ICIS director of Energy & Refining. “As a result, we forecast Brent rising sharply to around $90/barrel in March as the market prices both disruption risk and constrained physical flows,” he added. While peace negotiations could lead to Brent crude oil prices easing modestly in April to around $85/barrel, he anticipates a “gradually declining but persistent risk premium to remain embedded in prices for the remainder of the year, reflecting continued uncertainty around regional stability”. Europe and Asia impacted, US nuanced Most impacted from an economic standpoint will be Europe and China/Asia which are major importers of crude oil and LNG from the Middle East. This not only squeezes energy-intensive industries but consumers that will face higher prices at the pump and for electricity in their homes. European natural gas prices rocketed 50% on Monday as QatarEnergy announced a halt to LNG production at Ras Laffan due to attacks. Qatar produces nearly one-fifth of global LNG with 82% going to Asia and 11% to Europe. Major destinations are China, India, Taiwan, South Korea and Pakistan. The US economic impact will be more nuanced because of its large oil and gas sector. As long as oil prices remain below $100/barrel, it could be a wash for the US. “We had our first experience with this during 2014-2016, when oil prices collapsed. Economists using the old rules of thumb thought the US economy would boom. It didn’t as the oil patch collapsed, pulling steel, trucking, rail and pipeline activity with it,” said Kevin Swift, ICIS senior economist for Global Chemicals. “Other industries along the energy supply chain suffered as well and we had a near brush with recessionary conditions. Higher prices will affect consumer budgets and consumer spending and impact industries that use oil and derivatives as an input. But the US is also the leading producer of oil and a leading export nation,” he added. However, if crude oil rises to above $100/barrel, the negative impact on consumers and energy-intensive industries would overwhelm any positive effects, he noted. Sustained higher crude oil prices would also push up headline inflation, making it tougher for the US Federal Reserve to cut interest rates aggressively, even as the Fed’s preferred inflation measure is the core personal consumption expenditures (PCE) price index, which excludes food and energy. “Our rule of thumb is that a $10/barrel increase in Brent crude, if sustained, is equal to about 40 basis points (0.4 percentage points) on the headline CPI (consumer price index),” said Alan Detmeister, senior economist and Global Inflation Strategist at UBS on a 2 March conference call. There would be a much smaller 4 basis points impact on core CPI and the core PCE price index, he added. “Traditionally on the inflation side, the Fed has tended to look through the oil shocks and focus much more on the core impact. The core impact is very unclear, and really depends much more on how much oil prices rise and how long they are sustained,” said Detmeister.](https://www.recycling-magazine.com/wp-content/uploads/2026/03/ChatGPT-Image-4.-Marz-2026-10_31_56.png)
Massive export volumes of chemicals and plastics go through the Strait from Saudi Arabia, Qatar, the United Arab Emirates (UAE) and Kuwait with key destinations being China, the rest of Asia and the EU.
“Around 84% of Middle East polyethylene (PE) capacity relies on the Strait of Hormuz for waterborne exports, without accounting for eastern Saudi sites sending PE inland to their western ports,” noted Harrison Jacoby, director of PE at ICIS.
While Saudi Arabia has ports on the Red Sea in the west, its key petrochemicals hub is in Al Jubail in the Persian Gulf where exports go through the Strait. The UAE’s major ports are also mostly on the Persian Gulf, although the Port of Fujairah is on the Gulf of Oman further south.
The constraints on chemicals and plastics exports, along with key feedstock naphtha, will curtail availability and pressure prices higher on a global basis. Also lifting chemicals prices will be the surge in crude oil prices.
Roughly 80% of Asia’s seaborne naphtha import demand in 2025 is covered by Middle East supply, according to ICIS data. Should disruptions in the Strait of Hormuz persist, feedstock availability for some Asia crackers could come under strain.
While certain crackers can increase the share of liquefied petroleum gas (LPG) in their feedstock mix, this flexibility is limited, said ICIS senior analyst Doris He. Disruptions to Middle East propane supply would also raise feedstock costs for propane dehydrogenation (PDH) units and further compress propylene margins, said ICIS senior analyst Joey Zhou.
For US producers, the impact on demand could outweigh any benefits from constrained Middle East supplies.
“Higher geopolitical risk for energy prices likely shift focus to risks for margins, volumes and capex decisions. Excess capacity in petrochemicals suggests demand risk outweighs spread arbitrages,” said Laurence Alexander, US chemicals analyst at Jefferies, in a research note.
Methanol, PE, EG and PP key exports
However, Canada-based Methanex could benefit from a methanol supply shock, he noted. Methanol is Iran’s top chemicals export at well over 9 million tonnes in 2025, according to the ICIS Supply and Demand Database. Saudi Arabia also exported nearly 4 million tonnes of methanol.
Shares of Methanex rose around 4% in afternoon trading on 2 March.
Along with methanol, PE is the other top export from the Middle East, along with ethylene glycol (EG) and polypropylene (PP), according to the ICIS Supply and Demand Database.
US EG prices will likely see upward price pressure in the short term as a result of the increase in Asia spot prices, coupled with an expected increase in demand for exports as a result of the closure of the Strait of Hormuz.
With the closure of the Strait, exports from Kuwait and the port of Al Jubail in Saudi Arabia are impossible, according to EG market players.
There are production sites on the west coast of Saudi Arabia in Yanbu but ongoing Yemen- based Houthi militant threats make shipments risky in the Red Sea as well. China is the key recipient of PE, EG and methanol volumes from the Middle East but is self- sufficient in PP, while southeast Asia is a key destination for imports of PE and PP.
Significant volumes of PE and PP also go to the EU and India.
The Middle East exported over 12.5 million tonnes of PE in 2025 out of nearly 17 million tonnes of polyolefins, along with nearly 14 million tonnes of methanol and nearly 6.5 million tonnes of EG, according to the ICIS Supply and Demand Database.
US can help fill the gap
The US is a major exporter of PE to the tune of around half of total production, and can thus play a key role in plugging the gap with increased exports to Europe and Asia. EG is also a key US export.
“The US can certainly help fill gaps from potential Middle East supply disruptions and would welcome the opportunity as the potential of a highly restrictive antidumping duty [ADD] of $734.32/tonne on US PE by Brazil has significantly reduced recent shipments to the country, who was the third largest importer of US PE in 2025,” said ICIS’s Jacoby.
“The US is seeing production costs move lower this month, supporting strong production rates. However, the US would fall short of completely backfilling 100% of Middle Eastern exports if such an extreme outcome were to become reality,” he added, pointing out that the Middle East is the leading exporter of PE globally.
The global PE market is still facing overcapacity and is forecast to grow increasingly long until 2029, the ICIS analyst noted. “The capacity exists in the market today outside of the Middle East. However, it is in regions with higher cost structures,” said Jacoby.
“Clearly a complete switch from existing Middle Eastern supply chains is not something that happens overnight and grade slates will vary but necessity is the mother of invention should the situation become that dire,” he added.
Meanwhile, European chemicals prices are poised to rise. For example, European PE/PP producers have gone from separately looking for a €30-50/tonne increase for March contracts to separately offering triple-digit increases. US producers of olefins and polyolefins using shale gas feedstock will become even more cost-advantaged on a relative basis as crude oil prices rise.
“We typically focus on the oil-gas spread as the key driver of petrochemical margins,” said Alexander from Jefferies. He estimates that every $5/barrel move in oil prices, all else being equal, would add around $250 million to earnings before interest, tax, depreciation and amortization (EBITDA) for LyondellBasell, around $500 million for Dow and around $150 million for Methanex.
Demand risk from economic impact
The key risk to global economies and thus the demand side for chemicals is a prolonged period of elevated crude oil and natural gas prices, alongside overall geopolitical turmoil.
“We assume the conflict continues through March, in line with recent political statements, and that the Strait of Hormuz remains unofficially restricted in the near term. This is expected to tighten crude and refined product markets materially, particularly for major Asian importers such as China, India, Japan and South Korea, which rely heavily on Gulf supplies,” said Ajay Parmar, ICIS director of Energy & Refining.
“As a result, we forecast Brent rising sharply to around $90/barrel in March as the market prices both disruption risk and constrained physical flows,” he added.
While peace negotiations could lead to Brent crude oil prices easing modestly in April to around $85/barrel, he anticipates a “gradually declining but persistent risk premium to remain embedded in prices for the remainder of the year, reflecting continued uncertainty around regional stability”.
Europe and Asia impacted, US nuanced
Most impacted from an economic standpoint will be Europe and China/Asia which are major importers of crude oil and LNG from the Middle East. This not only squeezes energy-intensive industries but consumers that will face higher prices at the pump and for electricity in their homes.
European natural gas prices rocketed 50% on Monday as QatarEnergy announced a halt to LNG production at Ras Laffan due to attacks. Qatar produces nearly one-fifth of global LNG with 82% going to Asia and 11% to Europe. Major destinations are China, India, Taiwan, South Korea and Pakistan.
The US economic impact will be more nuanced because of its large oil and gas sector. As long as oil prices remain below $100/barrel, it could be a wash for the US. “We had our first experience with this during 2014-2016, when oil prices collapsed. Economists using the old rules of thumb thought the US economy would boom. It didn’t as the oil patch collapsed, pulling steel, trucking, rail and pipeline activity with it,” said Kevin Swift, ICIS senior economist for Global Chemicals.
“Other industries along the energy supply chain suffered as well and we had a near brush with recessionary conditions. Higher prices will affect consumer budgets and consumer spending and impact industries that use oil and derivatives as an input. But the US is also the leading producer of oil and a leading export nation,” he added.
However, if crude oil rises to above $100/barrel, the negative impact on consumers and energy-intensive industries would overwhelm any positive effects, he noted. Sustained higher crude oil prices would also push up headline inflation, making it tougher for the US Federal Reserve to cut interest rates aggressively, even as the Fed’s preferred inflation measure is the core personal consumption expenditures (PCE) price index, which excludes food and energy.
“Our rule of thumb is that a $10/barrel increase in Brent crude, if sustained, is equal to about 40 basis points (0.4 percentage points) on the headline CPI (consumer price index),” said Alan Detmeister, senior economist and Global Inflation Strategist at UBS on a 2 March conference call.
There would be a much smaller 4 basis points impact on core CPI and the core PCE price index, he added.
“Traditionally on the inflation side, the Fed has tended to look through the oil shocks and focus much more on the core impact. The core impact is very unclear, and really depends much more on how much oil prices rise and how long they are sustained,” said Detmeister.
