Chemical markets in the crossfire: assessing the impacts of the Middle East conflict

The Middle East conflict that erupted in late February 2026 has sent shockwaves through global energy and chemical markets. Following large-scale strikes on Iranian facilities and subsequent retaliatory attacks across the GCC region, the Strait of Hormuz - the critical chokepoint through which 20% of global oil and LNG flows - has effectively closed to commercial shipping as of 6 March 2026. Multiple key facilities have been impacted, including Qatar's LNG operations, Saudi Arabia's Ras Tanura refinery, and major ports in Kuwait and the UAE. 

For chemical markets, the implications are significant but not yet catastrophic. Drawing on insights from Wood Mackenzie's oils and chemicals product suite, Wood Mackenzie's base case scenario assumes a two-week closure of the Strait, which would be manageable given product already in transit and existing buyer inventories providing coverage through mid-March. However, polyolefins and MEG markets face the highest exposure, with Middle East suppliers accounting for 20-30% of demand in key Asian and European markets. Feedstock prices have already surged dramatically - naphtha, propane, and butane have all seen triple-digit increases in March forecasts compared to mid-February levels. 

The critical question now is timing. If the disruption extends beyond four weeks, the situation transforms from manageable to crisis. GCC producers would be forced to sharply cut operating rates as tank storage reaches capacity with no export outlet, while Asian buyers would face multi-million-tonne supply deficits and panic buying. Wood Mackenzie is monitoring the situation daily, tracking shipping resumptions, inventory levels, and spot prices to provide clients with real-time intelligence as events unfold. 

Download our detailed analysis of the Middle East conflict’s impacts on chemicals 

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