Why Iran war should make you as afraid of petrochemicals as oil prices

The price of naphtha may not keep you up at night when you think about the inflation yet to hit the economy from the U.S.-Iran war and Strait of Hormuz closure, but perhaps it should. 

As gas prices continue to rise alongside crude oil, costs of petroleum derivatives — petrochemicals — are also rising, and that eventually may have a far wider impact on consumers than gas prices. 

The cauldron of petrochemicals sounds like a high school chemistry class study guide: benzene, butadiene, ammonia, styrene, naphtha and many other oil-based byproducts. Known as feedstocks in industry parlance, they go into everything in your life, from hospital gloves to pasta packaging. And the costs of these chemicals are rising even if consumers won’t notice for a while. 

But Stanislav Krykun, CEO of DST-Pack, a Poland-based packaging company, is already seeing it on the factory floor. “Our plastic suppliers in China have raised prices by roughly 15% recently, and they’ve pointed to higher raw material costs and general market uncertainty as the reason,” Krykun said. 

Krykun’s factory produces packaging for companies all over the world, including the U.S., and he can see now what consumers will see later: increased prices.  

Most people aren’t focused on Advent calendars right now — those chocolates hidden under perforated punch-outs to celebrate each day of the season. But Krykun is thinking about it. 

Orders are already ramping up for the 2026 Christmas holiday season, and these calendars often include molded plastic trays inside, and these are going to get more expensive. 

“We’re currently working with dozens of clients on Advent calendar production, many of whom are at the sampling or early production stage. Due to recent developments, we’ve had to recalculate costs for many of these projects specifically because of the increase in plastic prices, which directly impacts the cost of these inserts,” Krykun said. 

One key thing to understand is that the impact of these price increases is not immediate. “It’s quite gradual,” Krykun said. Companies that had already confirmed production and locked in pricing for upcoming shipments were still able to proceed at previous cost levels. “However, all new orders placed over the past couple of weeks are already being quoted at higher prices,” Krykun said. 

“Packaging needs to be produced, shipped to the manufacturer, filled with product, and only then distributed to retail. So any price changes typically become visible on shelves with some lag rather than instantly,” Krykun added. 

Trillions of dollars in everyday goods will be impacted

When the lag wears off, the impact will be felt pretty much everywhere and in everything. 

“The uses of petrochemicals are wide-ranging and, essentially, impact everything we use and consume. It would be hard to identify something that didn’t have an oil or natural gas-based component unless it was constructed entirely of wood,” said Tom Seng, assistant professor of professional practice in energy finance at Texas Christian University’s Ralph Lowe Energy Institute. “The amount of plastic used in auto and truck manufacturing alone is huge,” he added.

Of the 193 active petrochemical complexes in the Middle East, about 79% are in just Saudi Arabia, Iran and Qatar, with Saudi Arabia alone representing 75% of production capacity. 

He added that the Gulf Cooperation Council States — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the U.A.E. — collectively produce about 12% of the world’s petrochemicals, or 150 million tons per year. 

All of those petrochemicals are almost solely dependent on the Strait of Hormuz for shipping their product. 

“There are so many of these everyday goods that will be impacted,” said Jeff Krimmel, founder of energy consultancy Krimmel Strategy Group. 

Krimmel said that petrochemical shortages and price increases will find their way into textiles, detergents, food, and beverages. 

“So much of the world is packaged and transported in various forms of plastic,” Krimmel said. 

All of those plastics come from feedstocks that have their origin in oil, like naphtha, propylene, methanol, ammonia, and styrene. While there are some byproducts available elsewhere, the Middle East oilfields are the top source for naphtha and there is no substitute for that. 

“Naphtha is really important, it is a richer, more liquid-based feedstock with a slate of outputs that cascade across the economy,” Krimmel said. 

Even if combat ceased immediately, it will take time to normalize the supply and demand on the back end. The longer hostilities last, the more the issues will accumulate. So, there is no consumer who should be breathing a sigh of relief any time soon, Krimmel said. 

More consumer price inflation, more lower-income stress

Atsi Sheth, chief credit officer at Moody’s Ratings, said this is only the most recent shock for a petrochemical industry that has seen several in recent years, from Covid to Ukraine to the Red Sea issues and now the Strait of Hormuz. She said the biggest shock, though, was China increasing its output of petrochemicals, and that global oil companies, sensing vertical integration opportunities, started producing more. 

“Moody’s has been calling out that there is a supply shock — too much supply, not enough demand,” Sheth said. Because of that, Moody’s has taken a number of downward ratings actions against producers, because the oversupply eats away at margins and the capacity to pay debt is eroding. But once current stocks are depleted, the shock will swing rapidly in the other direction, she said, and the expectation is that inflation ramps up as the year progresses.

“The inference we are making is that this will ultimately feed into consumer price inflation. Food, clothing, and other retail goods will hit those at the lower end of the income scale,” Sheth said. 

Peter Swartz, chief science officer and co-founder of supply chain analytics company Altana, said that the market is now pricing in uncertainty and that the long-term effects will include price increases no matter what happens on the battlefield. “The long-term effect is here. Every business is now planning for a more uncertain future and investing in diversification, and that is cost-additive,” Swartz said. 

There is a multiplier effect that follows a jolt to the petrochemical market like the one happening now, because petrochemical products go into tens of trillions of dollars of goods that then go into tens of trillions of other goods — all relying on the same petrochemical soup. “There is no magical easy substitution for these products,” Swartz said. 

Altana data shows that raw feedstocks comprising $733 billion in petrochemicals, intermediates, and finished products combined — 22% of the world’s total supply including ethylene, propylene, butadiene, benzene, toluene, xylenes, methanol, glycol, MTBE, epoxides, acetic acid, acrylic acid, PTA, acrylonitrile, and melamine  — flow through the Gulf. This has a downstream impact on $3.8 trillion in goods, from toothpaste to towels. 

Meanwhile, Krykun watches order volatility for his plastic packaging with alarm, and, at the very least, customers will notice less packaging but not less price. “We’re seeing brands make very practical adjustments,” he said. For example, a skincare brand may move from a more complex box structure to a simpler one. A phone accessories brand may reduce internal packaging components or redesign the structure to use less material. 

“Even for products like boxed chocolates, brands are simplifying internal layouts or overall construction to manage costs,” Krykun said. 

But time is not on the producers’ side. 

“Reducing packaging complexity or redesigning structures is not an immediate process — it often requires development work, testing, and approval cycles that can take weeks or months,” Krykun said. 

In many cases, brands simply do not have enough time to fully redesign packaging before their next production run. As a result, they are often forced to place the next bulk order at higher prices while simultaneously working on alternative, more cost-efficient packaging solutions in parallel.