The war involving Iran, Israel and the United States has started to reverberate through Asia’s plastics and petrochemicals markets, tightening supplies, pushing up prices and disrupting trade flows as oil and gas shipping through the Gulf region becomes increasingly uncertain.

Industry participants are already hurting by way of feedstock markets, particularly naphtha and liquefied petroleum gas (LPG), which combine to underpin much of Asia’s plastics production.

Prior to the outbreak of hostilities, an estimated 80% of Asia’s seaborne naphtha imports originated in the Gulf region, which has now made the petrochemical sector particularly vulnerable to ongoing disruptions linked to shipping through the Strait of Hormuz, according to the Institute of Materials, Minerals and Mining in London (IOM3).

The industry body has said that any restriction on the vital waterway could have a rapid knock-on effect on chemicals and plastics supply chains.

As a result, concerns about shipping safety and delays have already begun to affect the availability of cargo reaching Asian crackers. Analysts at the American Chemical Society’s Chemical & Engineering News confirmed this, saying that the closure or disruption of traffic through the Strait of Hormuz will directly hit Asia’s petrochemical producers, many of which rely heavily on Middle Eastern feedstocks. This has already been seen to some extent in Japan where the chemical arms of both Mitsubishi and Mitsui have reduced ethylene output since March 6 and March 9 respectively.

Other petrochemical producers in Asia have also started to reduce operating rates or at least review output plans as uncertainty over feedstock deliveries grows. Market intelligence group ICIS reported in the past week that the Middle East conflict now threatens petrochemical production across the region, with companies monitoring inventories and supply chains closely. And this will only worsen should the conflict drag on.

In the plastics market itself, tightening supply is beginning to emerge in polyolefins such as polyethylene (PE) and polypropylene (PP), which are widely used in packaging and automotive components as well as consumer goods.

ICIS reported that one Southeast Asian producer - Indonesia’s PT Chandra Asri Pacific - has already declared force majeure on PE and PP contracts after supply disruptions because of the conflict. Traders have also said some suppliers have also temporarily withdrawn spot offers as they assess the evolving situation and the availability of feedstock cargoes.

In knock-on effect, prices in parts of the Asian market have already begun to move higher. According to industry pricing service PolyesterTime, polypropylene flat yarn cargoes from China destined for Southeast Asia rose from roughly $850–$890 per tonne to between $965 and $1,000 per tonne within a week, reflecting tightening availability and heightened uncertainty over future supply.

Iran itself also plays a significant role in regional plastics trade, particularly in supplying polymers to China and other major Asian markets. Chinese Customs data analysis cited by Syntex America has indicated that Iran was China’s fourth-largest polyethylene supplier in 2025, accounting for roughly 8.4% of Chinese imports.

As such, and Donald Trump’s hints that we may be nearing the end of hostilities notwithstanding, continued and prolonged disruption to Iranian exports will force Asian buyers to seek alternative sources, potentially from the United States, South Korea or domestic Chinese producers. It is likely this process is already underway as companies seek to secure supply amid rising geopolitical risk.

Higher energy prices with oil recently moving past the $100 per barrel mark for a brief spell earlier in the week, are also feeding into the plastics market. Crude oil prices and refining margins in Asia have surged since the conflict escalated, and according to Reuters this is pushing up the cost of petrochemical feedstocks such as ethylene and propylene that are derived from oil and gas.

This combination of higher input costs and supply uncertainty is thus creating volatility across the plastics supply chain. Analysts at Mysteel said on March 2, the Iran conflict was sending a strong impulse through the ethylene industry chain – as is seen in the moves by Mitsubishi and Mitsui – and raising production costs for plastics manufacturers across Asia.

As expected, trading activity in parts of the market has slowed as buyers adopt a cautious stance. On March 3, S&P Global Commodity Insights reported that some polymer sellers had withdrawn offers altogether while traders wait for greater clarity on the trajectory of the conflict and the security of shipping routes.

A week later and little has changed. More and more reports of slowdowns in productions are coming in, with reports from Taiwan on March 9 now saying that Formosa Petrochemical Corp (FPCC) is the latest firm of note in East Asia to issue a force majeure notice on at least some of ​its petrochemical output. According to Reuters citing a company spokesperson, these include ethylene and propylene.

For now, the Asian plastics market is well and truly entrenched in a period of heightened volatility, with producers, traders and manufacturers all closely monitoring developments in the Middle East for signs of whether the shock will prove short-lived or evolve into a more prolonged supply crisis.