In the first quarter of 2026, the US-Israel-Iraq war rapidly impacted the sustainability of global supply chains. Disruptions to shipping through the Strait of Hormuz, coupled with damage to energy infrastructure, drove a significant increase in international oil prices and shipping costs, spreading globally along the "energy, logistics, raw materials, and manufacturing" chain, creating imported inflation and output contraction pressures.
China, as the world's largest manufacturing nation and energy importer, was directly impacted. On the one hand, supply contraction in the Middle East pushed up industrial product costs and squeezed corporate profits; on the other hand, shortages of petrochemical raw materials, unstable supply of key materials, and disruptions to logistics transit triggered production cuts and supply disruptions in industries such as chemicals and automobiles. Simultaneously, disruptions to Middle Eastern shipping and air transport hubs hampered trade and investment links between China and the Middle East. International oil prices continued their sharp rise, and domestic crude oil futures contracts also strengthened significantly. The United Nations and the international community strongly condemned the unilateral military actions of the US and Israel, urgently calling on all parties to immediately cease fire and return to diplomatic negotiations to prevent a complete deterioration of the situation. While OPEC+ is studying potential production increase plans, it is maintaining its existing production cuts. Short-term capacity increases are unlikely to compensate for the supply gap in Middle Eastern crude oil. Geopolitical risk premiums remain high, leading to significantly increased price volatility in the global energy and chemical sector.
Iran is a key node in the global energy commodity supply chain and a core source of my country's crude oil and energy raw materials imports. Its geopolitical position directly determines the global supply and demand balance and price trends of energy and related energy products. Its core strategic value is reflected in two dimensions: Globally: In 2025, Iran's crude oil production is projected at 3.3 million barrels per day, accounting for 3.3% of global production, and its seaborne exports account for 4% of global seaborne trade. In 2025, its LPG exports are projected at approximately 10 million tons, accounting for 7% of global LPG trade, making it the world's fourth-largest LPG exporter. Its natural gas production accounts for 6.4% of global production, making it the world's third-largest natural gas producer, after the United States and Russia. Simultaneously, the Middle East controls the Strait of Hormuz, a vital waterway for 20%-25% of global crude oil seaborne trade, 30% of LPG trade, and 20% of LNG trade. Energy exports from Persian Gulf countries like Saudi Arabia and Iraq rely on this waterway, and its safe passage directly impacts the stability of the global energy supply chain.
At the Chinese level: In 2024-2025, my country imported 1.38 million barrels of crude oil per day from Iran, accounting for 13.4% of total seaborne oil imports. Over 80% of Iran's crude oil exports flow to my country. Its LPG, iron ore, and copper ore continuously supply my country's chemical, steel, and non-ferrous metal industries. The methanol, MTO, and PX industries in South and East China are highly dependent on low-priced Iranian oil and gas feedstocks, directly influencing the cost center and price trends of related domestic products.
As a major supplier of polyethylene and other petrochemical products, the Middle East's export disruptions via the Strait of Hormuz have led to a tightening of global supply. At the same time, production stoppages and raw material shortages in Asia have also driven up prices throughout the plastics industry chain and Vinyl Acetate Monomer (VAM). This dynamic is driving demand for US-produced polyethylene. U.S. polyethylene producers are increasing their purchases of ethylene, a key feedstock, indicating that manufacturers are scrambling to seize export opportunities as global supply tightens.
Ethylene prices along the U.S. Gulf Coast are also rising as manufacturers stockpile raw materials. On Wednesday, at the Montpellier Bellevue hub in Texas, spot ethylene was trading at 30.25 cents per pound. This price rose further from about 27 cents on Monday, which had already reached a one-year high. The increase in ethylene prices, a core feedstock for the ethylene-based production process, has driven up prices for vinyl acetate, PVA, and other related products. Jiangsu ElephChem Holding Limited, with a 130,000-ton Polyvinyl Alcohol (PVA) production capacity using the calcium carbide-acetylene process, has ample feedstock supply and relatively stable prices, leading to a widening price spread. Overseas PVA production capacity is mainly based on the petroleum-based ethylene process, making it highly susceptible to ethylene supply and prices; however, China polyvinyl alcohol export demand is expected to increase.
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