The ongoing US–Iran conflict has severely disrupted maritime traffic through the Strait of Hormuz—a narrow but strategically vital waterway between Oman and Iran that connects the Persian Gulf with global markets. As the Arabian Gulf accounts for a significant share of global supply (around 20% of oil, 20% of LNG and 40% of LPG), the blockade of the strait has raised serious concerns over global energy security.
However, the strait is equally critical for the global chemical industry as a substantial portion of global chemical trade passes through this narrow passage. At the same time, many downstream chemical markets rely on shipments through the strait for essential feedstock supplies.
Significance of the Strait of Hormuz for global chemical trade
The Strait of Hormuz is a critical passage for the global chemical market, as Arabian Gulf countries account for roughly 27 million tonnes of chemical exports. Although the strait’s share in global chemical exports is relatively modest (around 10%), its importance is much greater for specific segments. In particular, more than 20% of global organic chemical exports transit through this route. As a result, prolonged disruption in the strait could significantly impact trade flows and constrain the production of downstream chemicals that depend on these supplies.
Figure 1: Share of Arabian Gulf in global chemical exports
Among the major importing regions of organic chemicals, the following regions depend more on supplies from the Arabian Gulf: Northeast Asia (26%), South Asia (38%), Southeast Asia (16%) and Europe (11%). India and China, in particular, rely heavily on the Gulf for organic chemical imports with the Strait of Hormuz alone accounting for about 35% and 30% of these imports, respectively.
Given the limited availability of alternative supplies outside the Arabian Gulf, a prolonged closure of the Strait of Hormuz would lead to a sharp decline in global trade of organic chemicals.
Source: Drewry Maritime Research
Among major organic chemicals, supply through the Strait of Hormuz is particularly critical for methanol (31%), ethylene glycol (53%), styrene (34%) and xylenes (10%). Dependence on Gulf supplies is especially high for methanol and ethylene glycol in both China and India, as Iran itself is one of the world’s largest producers and exporters of methanol.
For instance, India imports about 1.3 million tonnes of methanol (42% of its total imports), nearly 1 million tonnes of ethylene glycol (78%) and around 0.8 million tonnes of styrene (70%) from the Arabian Gulf.
A lifeline for feedstock supply
The blockade of the Strait of Hormuz has not only disrupted the direct trade of chemicals but also severely affected the supply of key feedstocks, particularly for the petchem industry. A potential halt in shipments of naphtha, LPG (propane and butane) and ethylene from the Arabian Gulf would create significant feedstock shortages, putting pressure on petchem producers. This, in turn, could reduce operating rates and disrupt global petchem trade.
For instance, traffic through the Strait of Hormuz accounts for about 24% of global naphtha supply. Any prolonged disruption would therefore significantly affect cracker operating rates, particularly in Asia, where many petchem plants rely heavily on imported naphtha.
Imports of Arabian Gulf countries through Strait of Hormuz
Although Arabian Gulf countries are major exporters of organic chemicals, they also import around 6.5 million tonnes of chemicals and vegoils through the Strait of Hormuz, accounting for roughly 2% of global trade. One of the key import categories through the strait is vegoils, particularly palm oil and sunflower oil, which together account for more than 40% of the total chemical and vegoil imports of the Arabian Gulf countries. Apart from vegoils, the region also imports significant volumes of benzene, MTBE and sulphuric acid through the strait.
Squeezed organic chemical supply to hurt chemical tanker demand
Overall, a closure of the Strait of Hormuz could disrupt about 12% of global trade in chemicals and vegoils, including flows in both directions. Apart from the direct impact on chemical trade, a prolonged disruption to the supply of oil, gas and petchem feedstocks through the Strait of Hormuz would also weigh on global economic growth. Slower economic activity would, in turn, dampen chemical demand and reduce overall chemical trade which would inevitably affect tonnage demand for chemical tankers.
In the initial phase, the halt in supplies from the Arabian Gulf would force buyers, particularly of organic chemicals such as methanol, to seek alternative sources. This could trigger vessel repositioning and temporarily tighten vessel availability in certain routes. However, if the disruption to Arabian Gulf exports persists, it would eventually weaken overall tonnage demand for chemical tankers, putting downwards pressure on freight rates, especially in light of the expected surge in tanker deliveries in 2026.
Coated tankers are likely to be more heavily affected due to a sharp decline in organic chemical trade. In contrast, the impact on stainless steel tankers is expected to be more moderate, as the Strait of Hormuz accounts for less than 4% of global trade in inorganic chemicals.
Source: Drewry
