Middle East Conflict Pushes Up Costs as Dow Warns the Chemical Industry Faces a Tougher Period

On April 23, after releasing its first-quarter results, Dow Chemical stated directly that supply disruptions caused by the Middle East conflict could continue to affect 2026, pushing up costs and influencing the pace of capacity expansion across the industry. The company said that higher oil prices and naphtha costs linked to risks around the Strait of Hormuz have already tightened global chemical supply and pushed up prices for plastics and polymers. At the same time, Dow has also stopped recognizing losses from its Sadara Chemical joint venture due to related liabilities and the shutdown of the Jubail complex in Saudi Arabia.

Dow’s statement is highly representative. It is not simply saying that “costs have risen.” It is pointing to two opposing forces now running through the global chemical chain: on one side, higher costs, disrupted assets, and pressure on joint ventures; on the other side, tighter supply pushing up prices for plastics and polymers, giving some product lines price support.

The problem starts on the cost side. Many chemical plants around the world still rely on naphtha, propane, LPG, and other feedstocks. After the Middle East situation became unstable, oil prices, shipping costs, insurance, and feedstock availability all started shifting at the same time. For producers in Europe and Asia that rely more heavily on naphtha-based routes, the pressure is more direct. U.S. companies may have an ethane and NGL cost advantage, but a global company like Dow cannot fully detach itself from the Middle East or global logistics.

This is especially true for joint ventures such as Sadara in Saudi Arabia. Once regional production, logistics, or utility systems are affected, financial reporting and operational judgment are both forced to adjust.

Dow’s warning that industry capacity expansion may be affected is even more worth watching. Over the past few years, the global chemical industry has already been dealing with new capacity pressure, uneven demand recovery, and margin volatility. Now that Middle East disruptions have pushed up uncertainty around feedstocks and logistics, companies will naturally become more cautious when evaluating new projects.

Capacity expansion is not only about whether demand is strong enough. It also depends on whether feedstock supply can remain stable, whether logistics can deliver, and whether financing costs can be absorbed. If the conflict continues for longer, delays or cancellations of some planned projects would not be surprising.

At the same time, Dow is not purely a victim. Global supply contraction, together with higher costs in Asia and Europe, will push up prices for plastics, polymers, and some chemical products. In this environment, the U.S. domestic ethane route has a relative cost advantage. If export demand increases, U.S. chemical companies may capture better spreads in some product lines.

The real question is how long this price support can last. If it is only a short-term panic-driven rally, prices may fall back once supply recovers. But if the Strait of Hormuz and Middle Eastern chemical infrastructure remain unstable for a long period, the global chemical cost curve may be lifted again, further amplifying the relative advantage of low-cost U.S. routes.

The chemical industry is no longer facing just another round of price increases. It is facing a reordering of costs, supply, capacity planning, and regional competitiveness. The longer the Middle East situation lasts, the harder it will be for companies to continue operating according to their old expansion pace, procurement rhythm, and pricing logic.