While the closure of the Strait of Hormuz has increased paraxylene (PX), purified terephthalic acid (PTA) and mono ethylene glycol (MEG) prices, outright supply shortages have been limited, with high crude oil prices being the dominant cost driver across the petrochemicals value chain, according to global research and consultancy group Wood Mackenzie.

Around 20% of Europe’s PX supply comes from the Middle East, a share that has grown with the addition of a new PTA asset in Türkiye. Middle Eastern supply accounts for only 5% to 10% of the US’s PX, with a similar share for the rest of the world, says Wood Mackenzie senior research analyst Santiago Castro.

Consequently, the primary impact was pricing-related rather than outright shortages, owing to feedstock price increases lifting costs across the board.

He notes that a genuine uncertainty is a PX asset in Kuwait that has not produced since the start of March, following State-owned hydrocarbon company Kuwait Petroleum Corporation’s force majeure declaration. It is confirmed that the unit was shut down owing to Hormuz-related export and feedstock disruptions rather than physical damage, however, the surrounding Shuaiba industrial zone has since been struck. Given the lack of confirmed damage to the unit itself, a restart is possible once the conflict ends.

Meanwhile, Saudi Arabia continued shipping from its western Red Sea coast throughout the conflict, and product continued flowing into Europe which built up inventories rather than draining them.

Castro notes that European buyers initially moved quickly to secure supply from domestic producers, pushing prices up sharply in March and April, but almost immediately reverted to a wait-and-see posture as imports continued.

In contrast, Asia experienced more acute impacts as the Middle East supplies a significant share of the naphtha that feeds Asian PX, PTA and polyester chains, with many Asian countries struggling to source naphtha as a result.

Castro says Asia experienced significant capacity-related impacts as some countries prioritised fuel production over petrochemicals, constraining feedstock availability and prompting producers to bring forward planned maintenance or reduce production.

While a significant volume of Asian capacity has been offline, some units have already begun returning to production, says Castro.

Similarly, with regard to MEG, the most acute impacts have been in Asia, particularly China, India and Southeast Asia, given Saudi Arabia and Kuwait’s roles as major producers, says Wood Mackenzie market analyst Mohamed Chilmeran.

He explains that Saudi Arabia’s larger production base sits on its eastern coast, which has been impacted by the disruption, with only partial coverage from its Red Sea facilities. Meanwhile Kuwait’s position meant that Asia absorbed the sharpest supply shortfall, which was compounded by the naphtha feedstock shortage.

North American production has been the “natural alternative” for Asian buyers, as costs are broadly comparable to Middle Eastern supply, while in Europe, Saudi Arabia’s reduced availability resulted in shortfalls in the Mediterranean region.

Two significant drivers of MEG production shutdowns were a dearth of feedstock in Asia and trade flow disruption from the Strait blockage, says Chilmeran, who adds that since the MEG markets were oversupplied, the current disruption is primarily trade flow rebalancing rather than genuine capacity shortage.

Chilmeran adds that the primary challenge was timing, because when the conflict began, North American operating rates were still depressed, driving a sharp price spike and a rush to secure product.

Industry Dynamics
Crude oil is the foundation for all petrochemical and feedstock prices, making the chemicals industry largely a price-taker from the broader energy market, explains Wood Mackenzie Macro Oils senior VP Alan Gelder.

On the PX side, feedstock costs are closely tied to gasoline markets, particularly in the US and Europe. Therefore, even if the Strait reopens and crude prices soften, PX feedstock prices in Europe and the US are likely to remain elevated until September, when seasonal gasoline demand falls and specifications change, Castro says.

Chilmeran adds that ethylene oxide (EO) prices jumped nearly 15% immediately after the crisis began, reflecting their direct link to ethylene, naphtha or ethane and ultimately oil prices. However, EO assets typically have flexibility to shift output between the glycols unit and the purified EO unit depending on where demand and margins are strongest.

“Feedstock cost movements and product availability constraints exerted notable pressure on prices across glycols and EO derivatives,” Chilmeran says.

Polyethylene terephthalate plastic, which depends on PTA and MEG, has faced simultaneous pressure on both inputs. Polyester producers have experienced the largest impact, with margins squeezed significantly, compounded by weaker polyester demand in Europe and the US independent of the closure of the trade or the increase in prices.

“After a disappointing 2025, we had anticipated a stronger recovery this summer. Instead we’re navigating both subdued demand and elevated input costs simultaneously,” says Castro.

A prolonged closure through year-end, which is not Wood Mackenzie’s base case, would have consequences well beyond petrochemicals. Oil prices could more than double current levels, tipping the global economy into stagflation, Gelder explains.

In that scenario, the chemicals industry would face simultaneously high input costs and collapsing demand, which would be felt across the entire value chain.