Recent joint military strikes by Israel and the United States against Iran have escalated tensions in the Middle East. An advisor to the commander of Iran's Islamic Revolutionary Guard Corps stated that the Strait of Hormuz has been closed and Iran will target any vessels attempting to pass through it. The sudden intensification of regional conflict has triggered significant volatility in global energy and chemical markets.
The resurgence of disruptions in the Strait of Hormuz, driven by geopolitical factors, is pushing crude oil prices higher. In 2025, Iran's crude oil production was 3.37 million barrels per day, accounting for 4.3% of global output. As a major oil producer with considerable control over the Strait of Hormuz, Iran's current oil production remains relatively stable. According to Bloomberg data, Iran's oil production and exports in January 2026 were 3.30 million and 1.53 million barrels per day, respectively. The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf, the Gulf of Oman, and the Arabian Sea. EIA data shows that oil transit through the strait reached 20.10 million barrels per day in the first quarter of 2025, representing 26.6% of global seaborne oil trade and 19.7% of global oil consumption. Even a temporary blockage would cause significant supply delays and increase transportation costs, thereby driving up global energy prices. Given the multiple stakeholders involved, a prolonged closure of the strait appears challenging. Such a scenario would negatively impact oil producers like Iran, Saudi Arabia, the UAE, and Iraq, while also creating substantial supply pressure for major importers such as China, India, South Korea, and Japan. The current oil price of $80 per barrel already reflects some market anticipation of supply disruptions from the Middle East. Future price trends will depend on geopolitical developments. If U.S.-Iran negotiations progress and the strait reopens, Brent crude prices could gradually retreat to the $60-$70 per barrel range amid expectations of a supply surplus. Conversely, a prolonged closure could push Brent prices toward the $90-$100 per barrel range.
Supply disruptions are also boosting natural gas prices. Approximately 20% of global liquefied natural gas (LNG) shipments transit the Strait of Hormuz. Furthermore, on March 2, QatarEnergy announced the suspension of LNG production following military attacks on its operational facilities in Ras Laffan Industrial City and Mesaieed Industrial City. As QatarEnergy holds about a 20% share of the global LNG export market, these events have caused tangible supply losses. Compounding the situation, European natural gas inventories are currently low, creating a need for restocking. Meanwhile, demand from China is expected to strengthen seasonally as industrial activity resumes. Driven by these supply and demand factors, natural gas prices are projected to remain firm in the near term.
Geopolitical instability is supporting methanol prices. Data from Longzhong Information indicates that Iran's total methanol capacity is 17.39 million tons per year, representing 59.9% of total Middle Eastern capacity and 22.9% of international capacity (excluding China). In 2025, Iran produced 9.70 million tons of methanol, accounting for 48.9% of Middle Eastern output and 19.0% of international production (excluding China). China imported 14.41 million tons of methanol in 2025, with an import dependency of 13.5%. Imports from the Middle East totaled 9.99 million tons, constituting 69.4% of China's total methanol imports. According to SCI99, Iran has 11 methanol plants, with 6 currently operating normally. Shipments of Iranian methanol fell to 275,000 tons in February, down 157,000 tons month-on-month and 36.3% year-on-year. The planned restart of two plants with combined capacity of 3.30 million tons per year has been postponed. Additionally, freight costs from the Middle East have risen significantly. If conflicts persist, methanol shipments from the region are likely to decline further in March. Combined with inventory replenishment needs, methanol prices are expected to stay strong in the short term, though the extent of gains will depend on port operations at Assaluyeh and transit conditions in the Strait of Hormuz.
Uncertainty surrounding the restart of Iranian urea production and exports could drive up global prices. Leveraging abundant natural gas resources, Iran is a major global producer and exporter of urea. SCI99 data shows Iran's urea capacity is nearly 9 million tons per year, with exports accounting for approximately 25% of the Middle Eastern market and 10%-15% globally, making it the world's third-largest exporter. In mid-January 2026, widespread shutdowns at Iranian urea plants, influenced by U.S.-Iran tensions, caused U.S. barge prices for urea to surge from an average of $362.5 to $423.5 per ton. The recent escalation increases uncertainty around the resumption of Iranian urea production and exports, potentially creating a temporary global supply gap and pushing international prices higher. China has sufficient domestic urea capacity, and its exports are subject to quota controls. If the quota increase trend seen in 2025 continues, higher volumes and prices could improve profitability for urea producers.
European chemical production reliant on natural gas faces significant uncertainty, with methionine, vitamins, and MDI/TDI particularly vulnerable. According to FuelsEurope, natural gas accounts for about 30% of direct feedstock for the European chemical industry, with higher proportions in Northern and Western Europe (e.g., UK, Norway, Belgium, Netherlands). Following the Russia-Ukraine conflict, Russian pipeline gas supplies dropped sharply, making Qatari LNG a critical source for Europe. In methionine production, natural gas serves as both an energy source and a direct feedstock; other raw materials include methanol, sulfur, and propylene. The recent surge in natural gas futures may affect the supply of methionine from Europe, which represents nearly 20% of global capacity. Furthermore, during the 2022 European energy crisis, vitamin and MDI/TDI production experienced output reductions and key intermediate supply disruptions. A recurrence is possible if current natural gas supply issues persist.
Rising shipping costs and extended transit times are expected to strengthen bromine prices. Israel and Jordan are the world's two largest bromine producers, leveraging rich reserves from the Dead Sea. Longzhong Information data indicates their respective global capacity shares are 33% and 19%. China is the largest global consumer of bromine but relies heavily on imports, primarily from Israel and Jordan. Customs data shows that China imported 35,000 tons from Israel and 14,000 tons from Jordan in 2025, together accounting for 64.7% of total imports. The escalation of Middle East conflicts raises the possibility of temporary production cuts or shutdowns at Israeli bromine facilities, potentially creating a supply gap. Additionally, logistics costs for exports from Israel and Jordan are set to rise significantly, and transportation timelines face uncertainty. These factors are likely to push bromine prices higher.
Investment Recommendations: Recent geopolitical tensions have driven price increases across major energy and chemical products. Investors may consider the following themes: first, high-dividend oil and gas companies benefiting from rising crude and natural gas prices; second, sectors where profitability may improve, such as coal-to-olefins, coal-to-methanol, urea, and bromine; third, potential competitive advantages for domestic Chinese companies if European gas-based chemical production is affected.
Risk Factors: Risks include further escalation of geopolitical conflicts, significant product price volatility, and supply chain disruptions due to logistics interruptions.
Comments