[Forward-Looking Analysis] Impact of Escalating U.S.-Iran Tensions on Domestic Chemical Market

I. Background of the Event:

At the end of 2025, nationwide economic protests broke out in Iran due to rising prices and currency devaluation, leading to riots in many places and causing casualties. U.S. President Trump repeatedly threatened publicly and on social media: If the Iranian government uses force against the protesters, the United States will intervene.

According to a report by The New York Times on January 10, Trump has been briefed on detailed operational plans for a military strike against Iran, though he has not yet made a final decision.

On January 11, U.S. officials stated that President Trump is considering various options for intervening in Iran, including announcing the deployment of an aircraft carrier strike group to the Middle East, launching cyberattacks, and engaging in information warfare.

The current situation is at a "critical point": if Iran further intensifies internal repression or attacks U.S. military targets, the United States is highly likely to carry out a "severe strike" against Iran, which could involve nuclear facilities, petrochemical hubs, or infrastructure along the Strait of Hormuz.

II. Forecasting Potential Impact Paths for Key Chemical Products

1. Crude Oil

Iran's Status: In 2025, Iran's daily crude oil production exceeds 3.2 million barrels, accounting for about 3.5%-4% of the global share, with exports of approximately 2 million barrels per day in October and November.

Approximately 90% of Iran's exported crude oil is purchased by China, accounting for about 15% of China's total imports.

Potential Impact: On one hand, Iran's main export destination is China, and China's short-term oil supply may face some impact; on the other hand, if the Strait of Hormuz is affected, the global oil supply impact will be reflected in shipping. The Strait of Hormuz is the only maritime route for oil from the Gulf region to the rest of the world. Most of the oil and gas exports from countries like Saudi Arabia, Iraq, Qatar, and the UAE are transported through this route, which at its peak accounted for 40% of global maritime crude oil trade. According to publicly available market data, the crude oil throughput in the Strait of Hormuz from 2023 to 2025 is approximately 20 million barrels per day, accounting for over 20% of global demand. If the Strait of Hormuz is affected, over 20% of global oil supply will be impacted. Alternative routes include pipelines from Saudi Arabia and the UAE that bypass the strait, but their capacity (roughly estimated at about 30%) is far less than the daily throughput of the strait, and shipping costs will increase significantly (in 2024, shipping insurance costs tripled due to the Red Sea crisis). Overall, short-term geopolitical risk supply concerns are expected to result in significant fluctuations in international oil prices. In the later stages, attention will be paid to the developments of the situation. If the conflict eases, international oil prices may continue to decline due to oversupply concerns; if the situation has a substantial impact, oil prices are likely to rise.

Iran's Status: The world's second-largest methanol producer, with a capacity of approximately 17.16 million tons per year by 2025, accounting for 10% of the world's total capacity, and over 90% of it is used for export.

China's Methanol Import Situation: Iran is China's largest methanol import source, with 5.73 million tons imported from January to November 2025, accounting for approximately 45% of the total import volume.

Potential Impact:

If the main methanol production areas are attacked in the short term, the facilities may face shutdowns. Additionally, protests may affect port transportation. If there are issues in the Strait of Hormuz, delays in methanol deliveries could reduce pressure on East China ports, providing certain support for methanol prices.

In the medium to long term, looking back at the Israel-Iran conflict in June 2025, during the conflict, Iranian methanol plants shut down for safety reasons, leading to a decline in import volume in June and July, with port inventories falling below the same period last year, causing prices to rebound rapidly. After the conflict ended, Iranian facilities quickly returned to operation, import volumes reached a new high, port inventories accumulated rapidly, and prices fell continuously.

Therefore, in the long term, Iran might continue to increase its exports to generate foreign exchange. The worse the economy gets, the more they may strive to export methanol for foreign exchange, which could in turn suppress prices. Going forward, it is necessary to closely monitor port inventories and arrival volumes.

3. Urea

Iran's status: the largest urea exporter in the Middle East, with an annual production capacity of 8 million tons, accounting for approximately 12% of global trade volume.

Iran primarily exports urea to Brazil, Turkey, and India. Additionally, Southeast Asia, the United States, Australia, and other regions also import some Iranian urea, but the quantity is relatively smaller.

Short-term protests may lead to production cuts or safety-related shutdowns at Iranian urea plants due to natural gas restrictions, causing a slight rebound in international urea prices. However, the domestic spot market is expected to remain relatively stable due to high inventory levels and low-priced orders ahead of the Spring Festival.

In reference to past events: In June 2025, the Israel-Iran conflict caused all urea factories in Iran to cease production, and Egypt also halted production due to a gas supply cut, leading to global supply tensions. The international urea price surged by $100/ton within a week, reaching $520/ton. After the conflict ended, Iran's capacity gradually recovered, and it might increase exports to earn foreign exchange, causing international prices to fall back. However, China's urea supply exceeds demand, and its import dependency is low, so the impact is expected to be limited. In the long term, geopolitical risk premiums will still exist, possibly raising the price floor.

4. Polyolefin (PE/PP)

Indirect influence as the main factor:

If Iran's large ethane cracking facilities suffer damage to their energy infrastructure, it may reduce HDPE and LLDPE exports. The impact on PP is mainly on the cost side.

From January to November 2025, China's import dependency on PE is approximately 30%, with imports from Iran accounting for about 9% of the total import volume. Iran's export of PP to China accounts for 10% of China's PP imports and about 0.7% of total supply.

The escalation of geopolitical tensions in Iran may lead to supply fluctuations of specific grades of PE in our country. However, considering that the general PE materials in our country have basically been domestically produced and that imported PE is mainly high-end material, the impact on the supply of plastic futures delivery products is relatively limited. In terms of cost, the geopolitical turmoil in Iran will affect the supply of crude oil, LPG, and methanol, thereby increasing the production costs of PE and PP.