The escalating geopolitical conflict in the Middle East, centered on the unpredictable status of the Strait of Hormuz—a critical chokepoint for global energy and chemical transportation—is transforming a geopolitical crisis into a systemic shock to global supply chains.

       Beginning with crude oil, a wave of widespread "force majeure" declarations is sweeping across Asia, Europe, and North America, impacting everything from base materials like ethylene and propylene, to downstream polymers such as polyethylene (PE) and polypropylene (PP), and further to specific segments like ethylene glycol (EG) and PVC.

   Petrochemical Raw Materials: Import "Lifelines" Severed, Alternative Channels Inadequate   

       The Middle East is not only a center for energy exports but also a crucial global production base for petrochemical raw materials. Disruption to shipping through the Strait, vital for access to and from the Persian Gulf, will directly impact the market supply of various basic chemicals. According to a force majeure tracking report released by Morgan Stanley on March 13, since the conflict began, force majeure declarations for major global chemical products have shown a连锁反应 (knock-on effect) spreading across regions and product categories.

       The olefins chain has become the hardest hit area in this current冲击 (shockwave). As of March 12, 3.9% of global ethylene capacity and 3.2% of global propylene capacity were under force majeure. Regionally, the impact is most concentrated in Southeast Asia and Central Europe: 20.4% of ethylene capacity in Southeast Asia is affected, while in Central Europe, the figure is a staggering 60.2%. Concurrently, force majeure declarations are rapidly propagating downstream along the industrial chain. Morgan Stanley data indicates that 1.4% of global polyethylene capacity and 1.0% of global polypropylene capacity are now under force majeure. Companies such as Taiwan's Formosa Plastics, LyondellBasell, Singapore's The Polyolefins Company (TPC), and Indonesia's PT Chandra Asri Pacific Tbk have all declared force majeure on polyolefin products.

       Production facilities within the Middle East have also suffered direct impacts. On March 2, QatarEnergy declared force majeure on its entire 77.4 million tons per annum LNG operations at the Ras Laffan Industrial City due to a production halt following an attack on its facilities. Kuwait's EQUATE declared force majeure on its 1.15 million tons per annum ethylene glycol production. Saudi Arabia's Sadara Chemical Company announced supply disruptions for its ethanolamines and glycol ethers products.

       Behind this supply crisis lies the international market's heavy reliance on Middle Eastern chemicals. The region accounts for approximately 35% of global polyethylene capacity and 28% of global polypropylene capacity. Hindered exports from the region directly create a monthly supply gap of nearly 3 million tons in the international polyolefins market. Expectations of supply disruptions have rapidly translated into price increases. The North American spot market provided an early indication: ethylene spot prices rose 24.0% compared to the last week of February, North American propylene increased by 12.8%, and North American polypropylene spot prices surged by 25.0%.

   Aluminum Industry: 9% of Global Capacity at Risk, Panic Among US Buyers   

       If oil is the lifeblood of industry, then aluminum is its skeleton. The Middle East is a critical link in the global aluminum chain. In 2025, the region's total primary aluminum production capacity reached 6.92 million tons, with actual output of 6.85 million tons, accounting for 9% of global supply. The regional aluminum industry is highly sensitive to shipping security through the Strait of Hormuz, facing a two-pronged threat to both its raw material inputs and finished product outputs. On March 3, the Qatalum plant halted production after an attack on its facilities, taking its 648,000 tons per annum capacity (0.82% of global supply) offline. The following day, Alba (Aluminum Bahrain) announced a production halt due to force majeure, affecting its 1.6 million tons per annum capacity (2% of global supply). Consequently, approximately 30% of primary aluminum capacity in the Middle East has been materially impacted. Smelter suspensions mean that some aluminum exports planned for international markets may not arrive on time, directly pushing up spot and futures prices. LME aluminum prices have climbed to near four-year highs, reaching $3,544 per ton. If the conflict escalates further, Middle Eastern smelters might be forced to cut output due to product backlogs and cash flow problems, creating a mismatch where "goods are stranded at the export source while importing regions face shortages," further inflating international aluminum prices.

       This supply crisis is quickly transmitting to consumers, especially in the US, which has a rigid demand for aluminum. Due to supply uncertainties from the Middle East, US importers are urgently seeking alternative sources. Market sources indicate that some US buyers have already started procuring replacement aluminum supplies from Asia to ensure the stability of their production chains. This shift implies that global aluminum trade flows may undergo a short-term reconfiguration.

   Building Materials and Chemical Fibers: The "Final Link" in Cost Transmission   

       The surge in upstream raw material prices is relentlessly cascading down the supply chain to every endpoint. A March 16 report from GF Securities' building materials sector noted that, impacted by the US-Israel-Iran conflict, prices of key raw materials needed for construction material production have risen dramatically compared to the beginning of the year: acrylic acid up 134.8%, polyethylene up 29.2%, and PVC up 26.4%. The pressure is particularly acute in the construction formwork industry. The Middle East is a major producing region for基础化工原料 (basic chemical raw materials) like formaldehyde and methanol. The regional instability has directly led to an 8% to 12% increase in the cost of key adhesives such as urea-formaldehyde resin and phenolic resin glue. Simultaneously, security threats in the Strait of Hormuz have forced numerous cargo ships to take detours, raising freight costs by over 40%, while marine insurance premium rates have skyrocketed by 300% to 500%. Several construction formwork manufacturers have been compelled to issue price adjustment notices.

       For two weeks, the skies over the Strait of Hormuz have been clouded by conflict, with Yemen's Houthi movement resuming military strikes against Israel, adding further complexity. For global manufacturing, the only certainty is that the cost increases and supply chain restructuring triggered by this turmoil are just beginning to reveal their profound impact. Morgan Stanley points out that given the highly fluid nature of the conflict, current tracking may not cover all ongoing production stoppages. If the conflict persists and the Strait of Hormuz remains impassable for an extended period, operating rates in the Middle East and Asia could decline further, and actual capacity losses will continue to widen—tightening the already stressed global industrial and supply chains and foreshadowing new, larger crises on the horizon.