Strait of Hormuz risk: petrochemical shock 2026

Why the Strait of Hormuz is back in focus

Industry executives are warning that financial markets may be underpricing the supply risk from the Iran war, particularly if disruption around the Strait of Hormuz drags on. The strait is a critical chokepoint for energy and petrochemical cargoes moving out of the Middle East. While crude oil and LNG often dominate headlines, petrochemicals and their feedstocks can face longer-lasting dislocations because supply chains are tightly scheduled and product specifications are hard to substitute quickly. A fragile ceasefire between the US and Iran has not removed near-term supply anxiety, as attacks on energy infrastructure were reported even after the ceasefire announcement. The result has been a reset in trade flows, with Asia facing shortages of key inputs and the US seeing stronger export demand.

Enterprise Products CEO flags a large volume at risk

Enterprise Products Partners LP Chief Executive Officer Jim Teague told investors that markets are “underestimating” the global supply implications of a prolonged closure of the Strait of Hormuz. Speaking on a Tuesday earnings call, Teague said that 12 million to 15 million barrels a day of crude oil, refined products, propane, and petrochemical supplies could be constrained depending on the scenario. The warning matters because propane and other natural gas liquids are not only fuels but also major petrochemical feedstocks. Any extended constraint can ripple into plastics, packaging, and industrial chemical supply, where inventory buffers are typically limited.

Dow expects disruptions to last through the rest of 2026

Dow Inc. Chief Executive Officer Jim Fitterling said supply disruptions tied to the Iran war are expected to persist throughout the remainder of 2026. On a Thursday call with analysts, Fitterling cited “constraints” that are visible in the near term, including supply chain disruption “for an extended period of time.” He also pointed to potential second-order effects: delays or cancellations of planned capacity additions and increased pressure for capacity rationalization. Dow’s comments underline that even if spot logistics improve, investment decisions and plant operating rates may adjust over a longer window.

Plastics flows tighten as Asia loses Middle East inputs

Disruptions tied to the war have tightened global supply and reshaped flows of petrochemicals such as polyethylene, which are widely used in packaging, food containers, medical supplies, and automotive parts. Producers in Asia have been cut off from ingredient supplies from the Middle East that feed manufacturing lines, contributing to a price jump in global markets. At the same time, demand for US exports is reported to be surging. At CERAWeek by S&P Global in Houston, Fitterling said almost 20% of global petrochemical capacity is blocked from the effective closure of the Strait of Hormuz chokepoint, and compared the supply-chain unwinding to COVID-era disruptions.

India’s fuel prices buffered, but growth risks remain

In India, consumers have largely been spared pump-price shocks for now, except for premium petrol prices, which were reported up about Rs 2.35 a litre, and jet fuel (ATF), which was higher by 8.5%. The article attributes the relative stability to elections in four states and one Union territory that began on 9 April and ended on 29 April, and to the Union government lowering excise duty to keep pump prices stable. But officials and economists flagged that volatility could still weigh on growth over time. Neeraj Mittal, secretary in the Ministry of Petroleum and Natural Gas, said India’s dependence on the Strait of Hormuz is higher than the world’s roughly 20% dependence across crude oil, natural gas, and LPG.

Indian plastic converters face steep polymer inflation

Market assessments cited sharp gains in polymer prices since the Iran war began. Indian PP raffia prices were last assessed at $1,300-1,400/t cfr India on 2 April, up by $145/t or 49% from $190-920/t on 27 February. Indian low-density polyethylene prices were assessed at $1,600-1,700/t cfr India on 2 April, up by $180/t or 54% from $1,060-1,080/t on 27 February. Traders said lower polymer imports from the Middle East and higher domestic prices are squeezing converters, while FMCG buyers are reluctant to accept packaging cost increases. Amit Kumar Agarwal, President of the Indian Plastics Federation, said a large share of Indian plastic converters are MSMEs and have been hit the worst.

Import dependence and supply hits compound the squeeze

The Middle East conflict has put at least half of India’s total polymer imports in jeopardy, with Gulf Co-operation Council countries supplying most of the imports. For 2025, the Middle East supplied around 62% of India’s polyethylene imports, or 1.41 million tonnes, and 51% of India’s polypropylene imports, or 930,000 tonnes. The situation is complicated by damage risks to production and logistics, with traders noting there is no certainty on product availability if petrochemical units were hit by missile and drone attacks. Reports cited drone and missile attacks affecting producers including UAE’s Borouge and Kuwait’s Petrochemical Industries Company, and fires in Saudi Arabia’s Jubail, a key petrochemicals hub.

Domestic diversions tighten feedstock availability

India’s domestic producers have also cut output, further tightening supply. State-controlled Indian Oil, Mangalore Refinery and Petrochemicals (MRPL), HPCL-Mittal Energy, and Reliance Industries (RIL) were reported to have cut PP output after the government asked refiners to divert propane, butene, and propylene toward cooking gas production, limiting petrochemical feedstock availability. Traders said China has stepped in to fill part of the void left by Middle East producers, but offers have remained elevated amid uncertainty and high Indian domestic prices.

Chemical industry stress: gas shortages and production curtailments

Indian Chemical Council President Ramya Bharathram said production of ammonia-based products and gas-dependent chemicals is down by 30-50%. She also said production of speciality chemicals and agrochemical intermediates is down 20-40%, with risks of further curtailments and temporary closures if conditions do not stabilise. The underlying issue is reduced availability of natural gas and the prioritisation of supplies for fertilisers and city gas distribution, which leaves other gas-dependent processes operating at suboptimal levels or temporarily halted. The impact spreads beyond chemicals into sectors that depend on petrochemical derivatives, including pharmaceuticals, electronics, and semiconductors.

Key figures at a glance

Market impact: what investors are watching

The immediate market risk is a sustained mismatch between where feedstocks are available and where downstream capacity sits. Fitterling highlighted that Western commodity petrochemical plants, led by the US, largely rely on ethane, while Asia and much of Europe rely more on naphtha, and he said almost half of Asia’s naphtha supplies flow through the Strait of Hormuz. The article also cited freight and insurance pressures, with higher war-risk premiums and longer routes raising import costs. For India, the pressure shows up in polymers, industrial gases, fertiliser-linked chemical chains, and packaging costs that can pass through to FMCG pricing with a lag. Business leaders in India also described an operational shock: Godrej Industries’ chemicals CEO Vishal Sharma said supply of natural gas has been cut by nearly 50%, and freight rates have risen by over 50% in some cases, with surcharges of thousands of dollars per container.

Conclusion

The current set of warnings from Enterprise Products and Dow points to a supply-chain problem that is larger than a short oil spike, with petrochemical and polymer disruptions expected to linger into 2026. For India, the mix of import dependence, feedstock diversions to cooking gas, and higher freight and insurance costs has already tightened supplies and raised prices. The key near-term swing factors remain the stability of the ceasefire, the security of energy and petrochemical infrastructure in the Gulf region, and the pace at which alternative supply routes and sourcing arrangements can be executed.