Middle East conflict blocks Hormuz Strait, tightening oil and petrochemical inputs and lifting costs across manufacturing sectors.

Many manufacturing sectors are struggling due to a shortage of crude oil feedstock after the Middle East conflict disrupted flows through the Hormuz Strait. The disruption has tightened petrochemical inputs and triggered a new cost crisis across industries ranging from packaging to healthcare.

Cause: Hormuz disruption tightens oil-derived inputs

The conflict has disrupted the flow of oil and gas through the Hormuz Strait, pushing fuel prices higher. It has also affected the supply of petrochemical products used to make a wide range of goods, including footwear, clothing, and plastic bags.

The impact is most visible in Asia, which accounts for more than half of global manufacturing output and relies heavily on imports of oil and related products.

Development: shortages spread into packaging and medical supply chains

In South Korea, people have been stockpiling trash bags, and the government is encouraging reductions in single-use items. In Taiwan, plastic producers are being asked to set up hotlines, while farmers expect higher rice prices because vacuum bags cannot be purchased.

In Japan, the oil crisis has raised concerns about a shortage of medical-grade plastic tubing used by dialysis patients. In Malaysia, manufacturers warn of a shortage of an oil by-product that could threaten global supplies of medical gloves.

“Everything is affected very quickly: beer, noodles, potato chips, toys, cosmetics,” said Dan Martin, Co-Director of Business Intelligence at Dezan Shira & Associates. He added that oil disruptions propagate quickly from petrochemical products into consumer goods.

Data and price signals

As producers face higher costs for energy and raw materials, they begin passing costs to consumers, increasing pressure on inflation and slowing economic activity.

The IMF said global growth this year could reach 3.3% if there were no conflict, but it will publish forecast revisions next week. IMF Managing Director Kristalina Georgieva said: “Although war can shape the global economy in many ways, all of them lead to higher prices and slower growth.”

Shortages are concentrated in naphtha, a by-product of oil and an important input for polymers. Countries are releasing emergency oil reserves, but this is described as only supplementing supply. Manufacturers have limited stock and few substitutes for naphtha.

Some petrochemical companies in Asia—where half of naphtha comes from the Middle East—have cut production or declared force majeure in recent weeks.

South Korea is importing the first lot of naphtha from Moscow since the Ukraine conflict began, taking advantage of the U.S. suspension of sanctions on oil and oil products from Russia. Seoul has also banned the export of naphtha to protect domestic supply.

According to ICIS, Asian prices for virgin plastic have surged by up to 59%, reaching a record high since the end of February when the U.S. and Israel began strikes on Iran.

• One of Thailand’s largest plastic packaging wholesalers raised the price of plastic bags by 10% across the board.
• Indian media reported bottled water became more expensive due to a fourfold rise in plastic caps since the Middle East conflict.
• Nongshim, Korea’s largest instant noodle producer, said its plastic packaging supplier has only about a month’s supply left.

Impact: higher input costs, production cuts, and inflation risk

Dan Martin said the shortage of oil-derived products is raising input costs, particularly for companies with strict standards such as semiconductors, automotive components, and medical or food packaging. He said companies have “almost no room to maneuver except to cut production and conserve energy.”

Shariene Goh, senior petrochemical analyst at ICIS, said consumer goods that rely heavily on plastic packaging—such as cosmetics—may be more prone to shortages than products that use plastic only partially. She added that shortages could emerge “fairly soon,” as existing stock will be depleted over time.

Morgan Stanley said the Middle East supplies 17% of global naphtha and 30% of virgin plastics, and also provides 45% of sulfur (used in fertilizer production), 33% of helium (used in semiconductors, medicine, and aerospace), and 22% of urea and ammonia.

Analysis: limited alternatives and delayed recovery

Some consumer goods manufacturers have delayed purchases in hopes that prices will fall if the conflict is resolved. Others are trying to cut costs by reducing plastic usage.

In Indonesia, where plastic prices have doubled in a month, companies have reduced packaging thickness. Some are considering alternatives such as paper, glass, aluminum, or recycled plastic. The Indonesian Packaging Federation cautioned that each option involves trade-offs in durability and safety compliance, as well as the time needed to adjust production lines and secure new supply sources, which could take 6 months to 1 year.

Stephen Moore, founder of MLT Analytics, said switching to alternative materials is also costly. He noted that recycled plastic and bioplastics supply remains limited, and that bioplastics cost 5–7 times more than fossil-based materials.

Moore added that even if conditions at the Hormuz Strait returned to normal immediately, it would still take at least a few months for Asia’s plastics industry to return to near-normal conditions.