Over the weekend, news of the US and Israeli military strikes on Iran has been dominating the headlines of major news outlets.

As a major global energy producer, Iran holds a pivotal position in the global supply of basic chemical raw materials such as oil, LPG and methanol. Meanwhile, Iran is also a key export and transportation hub for these raw materials – its ports and the Strait of Hormuz serve as the vital passage for such materials to enter the international market.

So, what impacts will this military operation have on Iran's exports of crude oil and chemicals? Especially for the Chinese market, which chemical imports will bear the brunt of the impact?

How important is the Strait of Hormuz?

According to energy trade assessments by statistical institutions such as the U.S. Energy Information Administration (EIA), the Strait of Hormuz connects the Persian Gulf with the Indian Ocean, with approximately 20 million barrels of crude oil passing through it daily, accounting for one-fifth of the world's total oil consumption, most of which is shipped to Asian countries and regions including China, South Korea, and Japan.

Furthermore, it is the "main gate" for chemical exports from the Middle East. The existing alternate pipelines can only handle about 15% to 20% of the transportation capacity at present.

Vessel tracking data shows that the number of ships transiting the Strait of Hormuz dropped sharply on March 1 (local time). (Source: Shipfinder)

This means that if the situation in the strait becomes tense or even blocked, it will not only impact oil prices, but more directly, imported chemical raw materials which rely heavily from the Middle East may face delivery delays or volume reductions.

Methanol: Over 50% import dependence, the most sensitive market

Among all chemical products, methanol is likely to be the first to feel the impact.

Iran is the world's second-largest methanol producer with an annual capacity of about 17 million tons, more than 80% of which is for export. As the world's largest methanol consumer, China has a huge domestic production capacity (about 118 million tons in 2025), yet still relies on imports for 12% to 15% of its consumption.

Notably, about 56% to 60% of China's imported methanol comes from Iran, accounting for around 7% of the country's apparent consumption.

This means that if the operation of Iranian ports is hindered or transportation through the Strait of Hormuz is disrupted, the supply and demand pattern of China's domestic methanol market may be directly affected.

For downstream enterprises that rely on methanol for production – such as MMA, formaldehyde and methanol fuel sectors – short-term inventory pressure and price fluctuations will pose practical challenges.

LPG: A quarter of imports from Iran

The liquefied petroleum gas (LPG) market is also highly sensitive.

About a quarter of China's LPG imports come from Iran, and together with Qatar, Saudi Arabia and other Middle Eastern countries, China's overall dependence on the Middle East for LPG is relatively high.

Rising crude oil prices will directly drive up LPG costs, while disruptions to the Strait of Hormuz will mean a possible reduction in cargo arrivals, tightening market supply and demand.

For enterprises using LPG as raw material or fuel, if the inventory turnover days are low, the pressure of rising short-term procurement costs will be quite direct.

Ethylene Glycol: Dual impacts of cost and logistics

The situation for ethylene glycol is slightly different.

China's domestic ethylene glycol production capacity has been rising steadily, with self-sufficiency rate climbing to around 78% and import dependence falling to 22%. However, the Middle East accounts for about 60% of the import share, and Iran remains an important supplier.

Ethylene glycol is facing a dual impact:

• On the one hand, rising crude oil prices drive up production costs via the naphtha → ethylene pathway;

• On the other hand, fluctuations in Iranian exports and shipping risks will exacerbate supply uncertainty. This combined impact of "cost + logistics" puts ethylene glycol's price elasticity at a medium to high level.

Polyethylene: Cost transmission is the focus

Polyethylene (PE) has a relatively manageable direct dependence on Middle Eastern supplies. China's direct imports of PE from Iran amount to approximately 1.125 million tons, accounting for 8.4% of total PE imports (if entrepot trade is included, the actual share would be higher).

However, it should be noted that:If the Strait of Hormuz is blocked for a long time and the overall Middle Eastern export channel is restricted, the PE market may experience a short-term supply shortage.

Even though the shortage can be alleviated in the long run through domestic new production capacity or other supply sources, the pressure of rising crude oil costs will still be transmitted to the downstream plastic products sector through the industrial chain.

Lessons from past logistics cost

Looking back at the end of 2023, the Houthi armed forces in Yemen attacked merchant ships in the Red Sea, forcing shipping companies to detour around the Cape of Good Hope in Africa. This added 3,000 to 3,500 nautical miles to the Asia-Europe shipping route and extended the voyage by 10 to 14 days. At that time, freight rates nearly doubled, and ship insurance premiums soared from US$10,000-20,000 to US$150,000-500,000.

If a similar situation occurs in the Strait of Hormuz, for products such as methanol and LPG that are highly dependent on Middle Eastern imports, logistics costs may soar faster than the raw material prices themselves.

In Conclusion

This latest military action by the US and Israel against Iran serves as another reminder to the industry: In a globalized supply chain, geopolitical risk is a variable that cannot be avoided.

For domestic chemical enterprises, whether it is raw material procurement, inventory management or downstream pricing strategies, it is necessary to incorporate "supply chain resilience" into daily considerations. Over-reliance on a single channel or a single supply source may lead to passivity when the market fluctuates.

Of course, there is no need to overreact. The scale and diversification of China's domestic chemical industry are increasing, and the self-sufficiency rate for some product categories has significantly improved. The key is to clearly understand how the specific segment you are in will be affected, and to make preparations in advance.