Overnight, the Middle East petrochemical sector has seen successive disruptions.

Xinhua News reported that Jubail Industrial City in northeastern Saudi Arabia was hit by a sudden explosion and large-scale attacks.

At nearly the same time, major petrochemical facilities in Iran were hit by airstrikes.

Prior to these events, Sadara Chemical in the same industrial zone had already suspended production due to disrupted logistics.

Meanwhile, ceasefire negotiations between the US and Iran emerged, leading to a short-term pullback in oil prices.

To understand how this wave of impacts spreads along the industrial chain, we must first recognize the strategic role played by Jubail.

1. Why Jubail?

To understand the current impact, we must first clarify Jubail's role.

As one of the world's most important petrochemical production bases, Jubail has an annual output of approximately 60 million tons of petrochemical products, accounting for 6%–8% of global output. More critically, it is not a single facility but a highly integrated industrial cluster — forming a complete value chain from upstream cracking feedstocks to midstream polyolefins and polyurethanes, and finally to a global-oriented export system.

Night view of Jubail Industrial City, Saudi Arabia (Source: NASA)

In short, Jubail functions as a "hub node" in the global chemical supply chain.

When such a node is simultaneously exposed to facility disruptions, rising geopolitical risks, and deteriorating shipping conditions, the impact goes beyond localized production cuts and leads to:

• Volatility in upstream feedstock supply

• Declining stability in midstream chemical products

• Passive cost increases in downstream manufacturing

More importantly, this is not a one-time shock but a "dynamic disruption" marked by persistent uncertainty. This lays the groundwork for a series of subsequent ripple effects.

2. Why is the impact amplified? The key lies in "cutting off the flow"

If the Jubail incident is the starting point, what truly amplifies the impact is the breakdown of the logistics system.

The shutdown of Sadara Chemical provides the clearest answer.

This petrochemical complex, with a total investment of approximately US$20 billion and an annual capacity of over 3 million tons, did not halt production due to equipment failure. Instead, it was forced to suspend operations because shipping through the Strait of Hormuz was disrupted. The fundamental issue is not whether it can produce — but rather: the finished products cannot access the global circulation system.

For a highly continuous operation like the chemical industry, this means:

• Disrupted feedstock supply → unstable plant operations

• Inability to ship out products → rising inventory and capital pressure

• Unfulfilled orders → global customers forced to switch suppliers

Once the "production – transport – delivery" chain is broken, even existing capacity cannot translate into effective supply.

This explains why the global polyurethane and specialty chemicals markets quickly saw a temporary supply gap after Sadara's shutdown.

3. Oil prices pull back, but supply contraction continues

Against a backdrop of already shrinking supply, oil price movements can easily be misinterpreted.

In terms of timing, the current oil price movements can be divided into two phases:

Phase 1: Escalating conflicts drive oil prices up

Fluctuating Middle East tensions combined with shipping risks have continuously intensified market concerns over supply disruptions. Crude oil prices rose in multiple rounds, lifting the cost base of the entire chemical industry.

Phase 2: Ceasefire expectations trigger a short-term pullback

On April 5, news emerged that the United States, Iran, and other parties were discussing a 45-day ceasefire agreement. At the same time, OPEC+ announced a modest production increase. Against this backdrop, oil prices saw a short-term decline — with both Brent crude and WTI falling to varying degrees.

Oil price trends and market expectations (Source: U.S. Energy Information Administration, EIA)

However, it is important to clarify that the pullback in oil prices is a revision of future expectations rather than a recovery of actual supply.

The current reality is:

• Sadara remains non-operational

• Operational stability at Jubail is still uncertain

• Shipping through the Strait of Hormuz has yet to resume

Therefore, in the chemical market, prices have not fallen in tandem with oil prices but have continued to rise:

• Core raw materials such as MDI and TDI have continued to increase in price

• International chemical companies are raising prices together

• Downstream manufacturing costs have been continuously pushed up

Behind this phenomenon is an ongoing change: the pricing logic of plastic and petrochemical products is shifting from "oil price-driven" to "supply accessibility-driven."

Conclusion: A shift from "cost first" to "security first"

From the attacks on Jubail and the shutdown of Sadara to the periodic correction in oil prices, one question arises: is the underlying logic of the global plastics and petrochemical supply chain undergoing a fundamental shift?

In the past, the industry placed greater emphasis on cost and efficiency, with low-cost feedstock from the Middle East supporting global supply. Today, supply security and stability have become far more critical factors.

This implies:

• A reassessment of risks associated with single supply hubs

• Supply chain diversification and regionalization are gaining momentum

• Accelerated local production of high-end materials

In the short term, the industry will see price volatility and order redistribution.

In the medium term, trade flows will be realigned.

In the long term, the entire industrial landscape will be reshaped.

For Chinese plastics and petrochemical enterprises, this is both an external shock and a window of opportunity.

What ultimately determines the outcome is not only how many orders they can secure, but whether they can establish a more solid global competitive position amid this round of industry restructuring.