Middle East Conflict Pushes Up Oil Prices as More Than 100 Chemical Raw Materials Rise in Concentration

Since March, the core variable in the global chemical market has no longer been traditional supply-demand dynamics alone. Instead, energy and logistics disruptions triggered by the Middle East conflict have rapidly transmitted along the chain of crude oil, naphtha, olefins, monomers, solvents, resins, and end products, directly lifting the cost center of the chemical industry. On March 12, TotalEnergies stated that due to the continuing Middle East conflict, it had halted or was in the process of halting part of its offshore oil and gas production in Qatar, Iraq, and the UAE, affecting around 15% of its total output. Around the same time, Kuwait Petroleum Corporation declared force majeure and began cutting crude production and refinery throughput. In its March oil report, the International Energy Agency projected that global oil supply would plunge by 8 million barrels per day in March, and it lowered its 2026 global oil supply growth forecast from 2.4 million barrels per day to 1.1 million barrels per day.

This means that the current rise in chemical prices is not an isolated fluctuation in just a few products. It is a systemic shock caused by damaged energy infrastructure, blocked transportation through the Strait of Hormuz, and forced cutbacks in refining capacity. Reuters graphics showed that shipping through the Strait of Hormuz once came close to a standstill, with average daily tanker traffic dropping from 37 vessels on February 27 to zero. Another Reuters report noted that Iran had effectively cut off this key passageway, which normally carries about one-fifth of global oil and gas transport, forcing Gulf exporters to rely on detours and pipeline diversion. Crude prices surged sharply as a result, with Brent once climbing back near the US$100 per barrel level. For the chemical industry, the significance of this change is very direct: as long as oil prices, freight rates, and insurance costs rise together, almost no oil-based chemical route can remain unaffected.

From the data, this transmission has already become highly visible. Looking at the ten-day increase from March 2 to March 12, acrylic acid rose 106.04%, methylene chloride rose 86.04%, butadiene rose 72.94%, isopropanol rose 61.17%, MIBK rose 53.66%, phenol rose 56.88%, industrial-grade n-butanol rose 45.60%, DMF rose 37.56%, and epichlorohydrin rose 53.93%. If the time frame is extended to all of 2026 so far, acrylic acid rose 123.65%, butadiene 95.20%, methylene chloride 92.34%, isopropanol 60.00%, MIBK 66.99%, benzene 61.46%, phenol 59.62%, and n-butanol 57.73%. These products share one clear feature: most of them sit in critical intermediate positions along the petrochemical main chain, acting both as direct derivatives of refining and olefin chains upstream and as basic inputs for downstream industries such as coatings, adhesives, plastics, rubber, pharmaceuticals, and textiles. These figures come from the price statistics tables you provided and reflect a clear, simultaneous upswing across multiple products.

The reason this round of increases has been especially sharp is, first, that the cost transmission path is unusually clear. Once crude prices move higher, the first products affected are bulk upstream feedstocks such as naphtha, ethylene, propylene, and benzene, followed by downstream derivatives including acrylic acid, styrene, acetone, MEK, isopropanol, epichlorohydrin, and TDI. In its March report, the IEA also lowered its 2026 global oil demand growth forecast from 850,000 barrels per day to 640,000 barrels per day, citing high oil prices, flight cancellations, and rising economic uncertainty. In other words, this is not a typical pro-cyclical story in which “strong demand is driving prices higher.” It is a cost-driven inflation process in which supply contraction and risk premiums move first, while demand comes under passive pressure even as downstream rigid demand remains in place. This type of increase is usually harder to handle because companies cannot easily offset rising costs simply by selling more volume.

Second, elasticity on the supply side is declining at the same time. The Middle East conflict first brings about an external supply contraction, but the domestic market is not an unlimited buffer that can fully replace lost supply. In the background material you provided, it was noted that domestic environmental controls, energy-consumption restrictions, industry capacity optimization, and anti-overcapacity policies have combined to push some small and medium-sized capacity out of the market, while approvals for new capacity have become stricter and industry concentration has increased. For many basic chemicals, total domestic nameplate capacity may appear large on paper, but the capacity that can actually be released quickly and stably under sudden external shocks, while still maintaining cost competitiveness and delivery continuity, is far less abundant than many imagine. Once the market enters a combined state of low inventories, external disruptions, and downstream restocking, prices tend to jump in steps rather than rise smoothly.

That is also why this round of increases is showing an obvious pattern of not a single-point breakout, but linked movement across the chain. In the year-on-year data you provided, battery-grade lithium hydroxide rose 119.63%, industrial-grade lithium hydroxide rose 112.59%, industrial-grade lithium carbonate rose 108.39%, battery-grade lithium carbonate rose 106.58%, bromine rose 103.54%, sulfur rose 83.56%, sulfuric acid rose 81.96%, acrylic acid rose 71.02%, ammonium sulfate rose 57.69%, epichlorohydrin rose 53.93%, and TDI rose 51.22%. This shows that the current upswing is not limited to traditional oil-based monomers, but has also spread into new energy materials, resource products, and inorganic chemical chains. Behind this are both the energy-cost resonance brought by higher oil and gas prices and the combined effects of overseas resource policy shifts, blocked shipping, supply-side destocking, and downstream replenishment.

Particular attention should be paid to the lithium, bromine, and sulfur chains. Lithium-related products rising by more than 100% year on year reflects not only strong new energy demand, but also simultaneous tightening at the resource, processing, and trading levels. The sharp rise in sulfur and sulfuric acid is linked to disruptions in Middle East supply and concurrent demand from phosphate chemicals, lithium batteries, and fertilizers downstream. The Middle East is itself a major global source of sulfur exports. Once Hormuz is disrupted, expectations for sulfur imports into China tighten immediately, and the effect then transmits through the sulfuric acid chain into titanium dioxide, phosphate fertilizers, and new energy materials. Put differently, the current rise in chemical prices is no longer simply a “petrochemical chain price increase,” but a cross-chain uplift driven jointly by energy shocks and resource constraints.

From the perspective of corporate operations, the most direct consequence of this kind of market is a redistribution of profits. Upstream resource and basic raw-material producers usually gain the first opportunity to repair margins during a rapid price surge, while midstream and downstream formulators, processors, and end manufacturers are more likely to be squeezed as costs rise faster than they can reprice orders. The many price-adjustment letters you provided earlier already show that companies in titanium dioxide, acrylic emulsion, polyether macromonomers, stabilizers, and waterproofing materials have all initiated price increases, almost all using similar language about “ensuring stable product quality and continuous supply.” Translated into operating language, that simply means: if costs are not immediately passed on downstream, the company’s own profit statement will go out of balance first.

From the perspective of market trading behavior, sentiment amplification is becoming an important driver of this round of increases. Against a backdrop of low inventories, producer reluctance to sell, trader restocking, and downstream fear of buying later at even higher prices all reinforce spot tightness and price increases. The latest information from Reuters and the IEA indicates that this Middle East conflict has already caused one of the largest oil-supply disruptions in history, with at least 8 million barrels per day of global supply affected. IEA member countries have agreed to release a record 400 million barrels of strategic reserves to stabilize the market. The fact that policymakers have had to intervene on such a scale already shows that the market is facing not ordinary volatility, but a systemic risk with broad spillover effects. As one of the most energy-sensitive industrial sectors, chemicals are inevitably among the first to be hit.

It also needs to be recognized that this broad-based price increase will not remain confined within the chemical sector. Products such as acrylic acid, styrene, MIBK, butadiene, isopropanol, TDI, and epichlorohydrin are linked almost entirely to downstream sectors including coatings, adhesives, plastics, rubber, textiles, furniture, automobiles, home appliances, construction, and pharmaceuticals. In other words, once chemical raw-material prices begin rising on a sustained basis, what is ultimately transmitted outward is not only corporate cost pressure, but broader industrial-product inflation and higher consumer living costs. That is why the market is becoming increasingly concerned about “overall inflation pressure,” not just “upstream price increases.” Chemicals are not an isolated sector. They are an intermediate layer and an amplifier for industrial manufacturing as a whole.

In the short term, the market is likely to revolve around three variables. The first is whether the Middle East situation continues to escalate, especially whether navigation through Hormuz can return to normal. The second is whether the release of strategic reserves and increased output from non-Middle East regions can partly offset the supply gap. The third is how much downstream domestic users can absorb high-priced raw materials, and whether phased demand delays or purchasing hesitation will emerge. If the conflict continues and transport recovers slowly, the current elevated cost center will probably not fall back quickly. If shipping and supply begin to recover gradually, some overly fast-rising products may see corrections, but their price floors are still unlikely to return to pre-conflict levels.

Overall, the broad rise in chemical raw materials is no longer a localized story limited to a handful of hot products. It is a full-chain reassessment of costs driven jointly by the Middle East conflict, surging crude prices, supply disruptions, low inventories, policy constraints, and amplified market sentiment. Looking at the ten-day surge, acrylic acid has already doubled, while bulk products such as methylene chloride, butadiene, isopropanol, and MIBK have all risen rapidly. Looking at year-to-date increases, more than one hundred chemical raw materials have entered a clear uptrend. Looking at year-on-year performance, resource- and energy-sensitive products such as lithium materials, bromine, sulfur, and sulfuric acid have also posted major gains. For companies, the key question now is no longer merely whether prices have risen, but rather which part of the cost increase can still be absorbed, which part must be passed on, and which part of the supply risk will continue to spill outward. That will directly shape the next phase of pricing across chemicals, manufacturing, and even end-consumer markets.