The war in Iran and the related shutdown of the Strait of Hormuz has halted petrochemical production along the Persian Gulf and slowed output in Asia, which is heavily dependent on oil from the Middle East. As petrochemical producers in the US and Europe disclose earnings for the first quarter and provide near-term forecasts, they say making up for the lost production from those regions will boost their profits in 2026.
US firms stand to reap the biggest windfall. For more than a decade, companies in the US have enjoyed a cost advantage for making the building block chemical ethylene because they use ethane extracted from cheap local natural gas as a raw material. Other regions, such as Europe and Asia, make ethylene from naphtha derived from oil.
The rule of thumb in the petrochemical industry is that if the ratio of international oil prices to US natural gas prices exceeds 10, US firms have a cost advantage. Even before the war, that ratio stood at about 24. With the spike in oil prices that the war has brought, it has swelled to nearly 41.
LyondellBasell Industries is already getting a lift from the conflict; its first-quarter earnings, excluding unusual items, jumped 48% over those reported a year ago. In a conference call with analysts on May 1, executives reported that the company’s US ethylene crackers are running at more than 95% of capacity. Its polyethylene orders are up 20% and its polypropylene orders are up 15% from before the war, prompting managers to try to boost production even further.
“At the low end of the cost curve, US ethane economics have improved, strengthening the cost advantage of LYB’s US Gulf Coast assets with low-cost raw materials and increased production to serve increased global demand,” LyondellBasell’s CEO Peter Vanacker told analysts, referring to the firm by its stock symbol.
Eastman Chemical expects its second-quarter earnings per share to climb 56–74% over those of the first quarter.
“The Middle East conflict is a significant disruption for our industry, which is likely to create net upside to our earnings,” CEO Mark Costa says in Eastman’s April 30 earnings announcement. “Compared to January, the most visible change is in Chemical Intermediates, where tightening market conditions are quickly and substantially improving margins.”
Similarly, Dow forecast that its earnings before taxes could more than double from the first quarter to the second.
Some European petrochemical makers expect to see a lift from the conflict as well. “For the chemicals and materials segments, we are expecting considerable improvements in earnings compared with the prior-year quarter,” BASF chief financial officer Dirk Elvermann said in an April 30 conference call, referring to the second quarter. “And this, of course, has to do with the current situation in the Middle East.”
European chemical makers have suffered in recent years because of high costs, sluggish demand, and cheap imports, mostly from Asia, but the conflict has slowed those imports.
In LyondellBasell’s conference call, Kim Foley, who runs the company’s olefins and polyolefins business, said that China sources 50% of its crude oil from the Middle East and that China’s government has told refineries to favor fuels over chemical feedstock production. “Ethylene cracker operating rates have steadily declined over the course of the conflict,” she said.
BASF’s Elvermann said such rationing has yet to hit Europe. “We do see the major bottlenecks for supply still in Asia. If you look into the list of force majeure declared these days, they are all coming from Asia,” he said. “They are not so much coming from Europe. Will this change over time? It’s not to be excluded. But for now, it is still predominantly an Asian topic.”
Although executives welcome the profit boost, they are starting to worry about the impact the higher energy prices will have on economic growth as the war wears on. “I struggle to see how inflationary pressures, particularly in areas reliant on imported energy like much of Asia and Europe, will not see an inevitable downward pressure later in the year,” Huntsman CEO Peter Huntsman told analysts on May 1.
2026 American Chemical Society
