One month into the conflict in Iran, people are starting to feel the impact. A shortage of crude oil is evolving into a much bigger problem—a potential shortage of essential goods.
This situation is mostly due to disruptions in oil and gas supplies through the Strait of Hormuz, which has cut global supply by about 20%. This not only leads to rising fuel prices but also affects the production of petrochemicals. These chemicals are crucial for everyday items like clothing, shoes, and plastic bags.
Right now, Asia is feeling the brunt of these changes. As the world’s manufacturing hub, it relies heavily on imports of oil and other raw materials. In South Korea, people are panic-buying trash bags. The government is encouraging event planners to use fewer disposable items. Taiwan is responding by setting up a hotline for manufacturers facing material shortages. Farmers are even warning of increased rice prices due to a lack of vacuum bags.
Japan’s medical sector faces challenges as well. Reports show that patients requiring hemodialysis may struggle to get treatment due to shortages of plastic medical tubes. In Malaysia, glove manufacturers say their supply chains are threatened by a lack of essential petrochemical byproducts.
Dan Martin, a business expert at Dezan Shira & Associates, pointed out that many products—like beer, noodles, and cosmetics—are affected. Plastic containers and packaging are now hard to come by, which drives production costs higher for these everyday items.
This turmoil is pushing global inflation up. Rising energy and material costs hurt profit margins, forcing manufacturers to hike consumer prices. The International Monetary Fund warns that these challenges come at a time when the world’s economies can least afford them, leading to slower growth and higher prices across various sectors.
To tackle the crisis, countries have started tapping into emergency oil reserves. However, the larger issue lies in a shortage of naphtha, a key ingredient for synthetic materials. As a result, some companies in Asia have begun cutting production or declaring force majeure—a term that means they can’t meet contractual obligations due to unforeseen circumstances.
South Korea recently started buying naphtha from Russia since U.S. sanctions were relaxed. Meanwhile, some companies in Vietnam are facing rising costs, particularly in industries that require highly specific materials such as semiconductors and automotive parts.
Producers are now investing more time and resources into securing raw materials, causing prices for plastic products to skyrocket. According to ICIS, prices for plastic resins in Asia have surged by up to 59% since the conflict started. Wholesalers are increasing prices for items like cellophane bags, and bottled water prices have soared, with plastic cap costs quadrupling.
Experts like Shariene Goh at ICIS believe that shortages will hit consumer goods heavily reliant on plastic sooner than expected. She noted that companies may soon find themselves running low on stock as inventory levels decrease.
The ripple effects from Asia’s supply issues could reach worldwide markets. The Middle East is critical not just for naphtha but also for other essential materials like sulfur for fertilizers and helium for various high-tech applications. The rising costs are already felt by U.S. farmers, who have seen fertilizer prices increase by around 33%. In India, condom manufacturers are similarly reporting disruptions.
As the situation unfolds, the effects are expected to spread like they did during COVID-19—a sequential disruption moving across global markets. Right now, Asian countries are actively trying to mitigate price spikes through oil stockpile releases and other measures. However, experts warn that the supply crunch will likely worsen as the last of the pre-crisis crude deliveries arrive.
Overall, the primary challenge has shifted from high prices to physical shortages, marking a new phase in the crisis. Some companies are delaying purchases in hopes that prices will stabilize once the situation in the Middle East improves. However, uncertainty clouds the future for many industries.
As a polyester maker in China explained, the cost of raw materials has jumped significantly, leading businesses to proceed cautiously. With plastic prices on the rise, some companies are even considering alternatives for packaging. However, switching materials comes with its own set of challenges and costs, making it a tough decision. Industry experts suggest that even if conditions return to normal quickly, the recovery for the plastic sector may take months.
