The Iran war’s escalation has disrupted plastic supply chains, causing uncertainty and price spikes in the market. In June, a preliminary U.S. ceasefire with Iran and the Strait of Hormuz reopening had raised hopes of renormalizing plastics markets, but the conflict’s resurgence in July pushed some converters to consider swapping out virgin materials for recycled resins.
Impact on Virgin and Recycled Markets
Experts believe that the impacts of the conflict will last into 2027, regardless of when it ends. Jim Owen, senior packaging and logistics analyst at Rabobank, notes that the Strait of Hormuz is a leading trade route for polyolefins and their raw material supplies, and volumes can’t be quickly rerouted when it closes.
The 2026 seven-day moving average of ships arriving in the Strait of Hormuz compared with the 2025 seven-day moving average shows a significant drop in activity. This drop has had a ripple effect on the global petrochemical and polyolefin movement, which aligns with overall ship activity through the Strait of Hormuz.
Supply Chain Disruptions
Virgin resin vulnerabilities resulted from 30 years of investments in cheap resin production concentrated in the Middle East, U.S., and China, leading to a structural oversupply of polyolefins and the Strait of Hormuz becoming a choke point, according to Owen. The rapid switches from war to peace and back again have resulted in a “stop-start recovery,” he said.
Esteban Sagel, principal and CEO at Chemical and Polymer Market Consultants, notes that crude oil prices have leaped again, and polyolefin prices are expected to follow. In fact, Dow‘s second-quarter earnings release noted a 30% year-over-year local price boost in its Packaging & Specialty Plastics division, driven by higher PE prices in all regions.
Middle Eastern petroleum infrastructure has been damaged during fighting, and petroleum-derived naphtha is a key feedstock for global polyethylene production. However, North America — the second-largest global PE exporter — is more reliant on ethane made domestically from natural gas.
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Recycled vs. Virgin Price Gap Narrows
Price spikes and more challenging logistics for virgin resins this year have opened doors for recycled grades, making their traditionally higher prices more competitive for customers, including packaging converters. Corbin Olson, senior analyst and researcher for plastics recycling at ICIS, notes that the Iran conflict highlighted the vulnerability of virgin supply chains and demonstrated that recycled plastics can serve as a regional supply source during periods of market uncertainty. They also serve as a means of climate risk management.
The virgin to recycled substitution has varied by region, with customers in Europe and Asia more inclined to switch to recycled material due to greater disruption from the Middle East conflict. Demand for recycled resins in the U.S. has remained relatively flat despite the narrow price premium during the war.
Experts believe that the impacts of the conflict will last into 2027, regardless of when it ends.
The situation is complex, with many factors at play. Sagel notes that the elimination of so much polyolefin material from the market could eventually end the ongoing oversupply and take global markets closer to a supply and demand balance.
It is a challenging time.
Companies are reassessing their supply chains.
