The recent conflict between Iran and Israel has raised concerns over global energy and petrochemical supply chains. As one of the major producers and exporters of crude oil and petrochemical feedstocks, Iran’s role in global trade is crucial, especially for countries in Asia and Europe.
With tensions rising in the Middle East and uncertainty around shipping routes like the Strait of Hormuz, global markets are already seeing signs of disruption. Feedstocks such as methanol, LPG, naphtha, and ethylene are at risk, and price volatility is being observed across several regions.
This blog dives into how the conflict is affecting feedstock supplies, trade flows, and key companies.
Strategic Importance of the Middle East
The Middle East holds a central position in the global petrochemical and energy landscape. Countries like Iran, Saudi Arabia, and the UAE are major producers and exporters of crude oil, natural gas liquids (NGLs), and essential petrochemical feedstocks such as methanol, LPG, and naphtha.
One of the most important trade routes in the region is the Strait of Hormuz. Around 20% of the world’s crude oil and LNG passes through this narrow waterway each day. Any disruption in this area can delay shipments, raise freight costs, and reduce supply availability for countries in Asia, Europe, and beyond.
The region also supplies nearly 30–35% of the world’s LPG exports. These feedstocks support downstream industries such as packaging, construction, automobiles, and chemicals in countries like India, China, South Korea, and Japan, making the Middle East a crucial link in global supply chains.
Iran’s Export–Import Status Amid Conflict
Iran is one of the largest exporters of petrochemical feedstocks in the Middle East. It supplies key products such as methanol, LPG, and ethylene-based derivatives to countries including China, India, and Turkey. In the financial year ending March 2025, Iran exported around 150 million metric tons of non-oil goods, valued at nearly USD 60 billion.
Petrochemical exports remain a major part of Iran’s trade, with methanol alone accounting for a significant share. China continues to be Iran’s largest trading partner, followed by Turkey and India.
However, the ongoing conflict has raised concerns about sanctions and shipping risks. Many exports of Iran already move through indirect routes via countries like the UAE and Oman due to existing restrictions. Any new escalation could affect these channels, timely deliveries, or lead to reduced trade volumes, putting pressure on countries that rely on Iran for feedstock supply.
Major countries dependent on Iran for feedstocks
Petrochemical Feedstocks Manufactured by Iran
Iran plays a significant role in manufacturing a wide range of petrochemical feedstocks that are essential for downstream industries across the world. Some of the major feedstocks produced in the country include methanol, natural gas, ethane, LPG (propane and butane), naphtha, and ethylene.
Methanol is one of Iran’s most important petrochemical exports, with China alone importing over 5 million tonnes from Iran in 2024. The country is also a major exporter of LPG, supplying to countries like China and India. Its production hubs, such as Assaluyeh and Bandar Imam, handle a large portion of the country’s petrochemical output.
Although Iran’s feedstock production remained stable through early 2025, the ongoing conflict with Israel has increased the risk of disruptions at key facilities, either from military threats or tighter trade restrictions.
Countries Most Dependent on Iranian or Gulf Feedstocks
Several countries, especially in Asia, depend more on petrochemical feedstocks imported from Iran and neighbouring Gulf countries. China, for example, imported around 8 million tonnes of LPG from Iran in 2024, and is expected to have received approximately 5 million tonnes in the first half of 2025, which makes it vulnerable to any interruption in supplies from Iran.
India is another major importer, sourcing LPG, naphtha, and NGLs from the Middle East to meet domestic demand. Around 90% of India’s crude oil requirements were met through imports in the financial year up to February 2025.
Other countries like South Korea, Japan, and Pakistan also depend on Gulf feedstock flows, such as ethylene, propane, and methanol. Disruptions could lead to rising costs, delayed deliveries, and reduced availability.
Supply & Price Impacts on Global Feedstocks
The Iran–Israel conflict has raised concerns across the global feedstock market, particularly around availability and logistics. Methanol prices were already showing signs of growth before the conflict.
According to observations by ChemAnalyst, methanol prices in China rose by nearly 5% in the first two weeks of June 2025. The German market saw a sharper increase of around 17.5% over the same period. Although these movements occurred before the escalation, the conflict may add further pressure on global methanol availability.
Other feedstocks like naphtha, ethylene, and styrene are also vulnerable. Insurance costs, limited vessel access, and regional risk premiums are already contributing to rising input costs for downstream manufacturers.
Price trend of Methanol in China and Germany
Freight Charges, Shipping Routes & Port Disruptions
The conflict has caused substantial concerns across major shipping routes in the Middle East. The Strait of Hormuz, a crucial passage for crude oil and petrochemical feedstocks, is now considered a high-risk zone. As a result, freight charges and marine insurance premiums have increased sharply.
VLCC tanker rates for the Middle East to China route have increased phenomenally by 138% to around USD 48,000 per day. Marine insurance premiums have also increased by over 60%, with war risk coverage for vessels in the Gulf rising significantly, adding further cost pressure on feedstock shipments.
Ports across the Gulf and Red Sea regions are facing longer turnaround times due to rerouting, higher inspection levels, and increased insurance paperwork. These delays are likely to add cost and time pressure to global feedstock shipments.
Regional Trade Implications
The Iran-Israel battle is affecting trade activity not only within the Middle East but also across Asia, Europe, and the Americas. GCC countries like Saudi Arabia are experiencing increased shipping costs and extended delivery times due to congestion and risk premiums in the Strait of Hormuz and the Red Sea.
India, Pakistan, and Bangladesh may face higher feedstock import costs as shipping lanes tighten and freight rates incline. East Asian are closely monitoring supply schedules, particularly for LPG, methanol, and naphtha.
In Europe, feedstock imports through the Suez Canal have been delayed due to rerouting, adding cost pressure on downstream manufacturing. South American countries like Brazil and Argentina, which rely on flexible global sourcing, are also likely to see indirect effects through increased spot prices and delayed shipments.
Major countries affected by Iran-Israel conflict
Companies Affected Globally
Several companies across the petrochemical and shipping sectors are facing increased operational risks due to the Iran–Israel conflict. Reliance Industries in India relies on Middle Eastern feedstocks such as methanol and naphtha for its refining and petrochemical operations. Raise in freight rates and longer shipping routes may impact delivery timelines and input costs.
SABIC could see disruptions in regional trade flows, particularly in outbound shipments to Asia and Europe. Companies like LyondellBasell, which depend on feedstock flows from the Gulf, may experience shipping delays and price fluctuations.
Shipping and logistics firms with routes passing through the Strait of Hormuz, such as Maersk and Mitsui O.S.K. Lines, are also exposed to risk premiums, rerouting costs, and insurance adjustments.
Outlook & Conclusion
The Iran–Israel conflict, while still evolving, has already affected key areas of global petrochemical trade, from changing feedstock prices to disrupted shipping and increased insurance costs. If this situation continues, more supply-side constraints and trade rerouting are likely, especially through the Strait of Hormuz and the Red Sea.
In the short term, industries may face delays in feedstock deliveries, higher input costs, and tighter procurement timelines. Over the medium term, companies may look to diversify sourcing, and modify their inventory strategies, or secure long-term contracts to reduce volatilities.
While no immediate long-term shift can be ascertained currently, this scenario shows how quickly global feedstock flows can be affected by regional instabilities.
