[Industry Trends] US-Israel Conflict Blocks Strait of Hormuz! Short, Medium, and Long-Term Impacts on Petrochemicals

The international situation has escalated sharply recently. With US and Israeli military actions against Iran, the Middle East powder keg has been ignited once again, leading to the critical crisis of Iran blocking the "Strait of Hormuz"—the world's major crude oil artery.

The Strait of Hormuz controls nearly 30% of global crude oil shipments. A blockade of this strait is a storm that the petrochemical, rubber, and plastics industries in Taiwan cannot ignore. Depending on the duration of the blockade, we will face entirely different levels of impact:

• Short-Term Impact (1 Week): Panic-Driven Price Spikes If the blockade lasts only a week, physical material shortages won't appear immediately, but "psychological panic" will dominate the market. International crude oil futures will spike instantly, and shipping companies will suspend quotes for the region or impose hefty war risk premiums. For the rubber and plastics industry, raw material quotes in the spot market will immediately stiffen, though most enterprises can weather this brief price fluctuation using their routine inventory.

• Medium-Term Impact (4 to 8 Weeks): Supply Chain Chaos and Surging Freight Costs When the blockade extends to one or two months, physical "chain breaks" will begin to show. Oil and cargo ships originally passing through the strait must detour around the Cape of Good Hope, adding 2 to 3 weeks to their journey. This not only multiplies global shipping costs but also forces Asian petrochemical plants to cut production as they wait for upstream feedstocks like naphtha. At this point, prices for downstream plastic pellets and rubber materials will surge comprehensively. Small and medium-sized processing plants will face the dilemma of "not being able to buy materials even with money" or "costs eating up all profits."

• Long-Term Impact (3 Months or More): Structural Shortages and Default Waves If the blockade lasts for a full quarter, the global petrochemical supply chain will face catastrophic restructuring. The market will experience severe structural material shortages, and many upstream suppliers might directly declare "Force Majeure" and halt deliveries. By then, enterprises without strategic reserves will face massive risks of full production line shutdowns and hefty default compensations for failing to deliver to end customers.

[Editor MARS's View] A 3-Month "Safety Stock" is Our Greatest Promise to Clients

Seeing such drastic shifts in the international landscape deeply resonates with me. Facing an extreme situation like a strait blockade truly tests an enterprise's "resilience." If it's just a one-week blockade, everyone can grit their teeth and get through it; but once it stretches to three months, the market will absolutely undergo a brutal shakeup.

This is exactly why, when negotiating multinational supply contracts on the front lines (such as for our commonly used NBR rubber materials), we absolutely insist on establishing and maintaining a "3-month safety stock"—even if it increases the pressure of tied-up capital.

In peaceful times, safety stock might seem like an excess cost; but when geopolitical crises erupt, it is a lifesaver. When peers are halting production and defaulting on contracts due to a three-month material shortage, we can still steadily deliver high-quality products to our clients because we planned a comprehensive inventory safety net in advance. In this era full of variables, "stable delivery" is an enterprise's most irreplaceable competitive advantage!