The Middle East "Energy War" Continues to Escalate, Oil, Gas, and Chemical Assets Surge Across the Board

Ask AI · When will the Strait of Hormuz blockade be lifted, and will oil prices keep surging?

The global petrochemical supply chain has again been severely disrupted. With no clarity on the outlook for the Strait of Hormuz to resume operations, crude oil and chemical assets have once more triggered a surge-limit rally.

On April 7, China’s A-share oil and petrochemical sector led the market. By the close, the Wind Oil & Chemical Index jumped more than 5%. Within the chemical sub-sectors, individual stocks saw even stronger gains. Dongyue Silicone Material (300821.SZ) and Jiangtian Chemical (300927.SZ) hit 20% limit-up; Hengyi Petrochemical (000703.SZ) and Xinghua Shares (002109.SZ) and about 20 other stocks also hit limit-up. For ETFs, the Chemical Industry ETF by E Fund (516570), the Chemical ETF by Huabo (516020), and the Chemical ETF by Tianshong (159133) all rose more than 3%.

According to a report by Xinhua News Agency, in the early hours of the 7th local time, Iran cited unnamed sources claiming that an explosion occurred in the Jubail industrial zone in northeastern Saudi Arabia involving U.S. capital, and that it was the result of a broad-scale attack.

As a result, oil prices surged during trading. WTI crude oil futures reached a high of $116.5 per barrel, and by the time of this release were at $115 per barrel. Domestic commodity futures followed higher as well. By the close, chemical products led the gains: ethylene glycol rose 10.99%, methanol rose 8.69%, and the containerized freight index (Europe line) rose 2.73%.

Haitong Futures believes that the situation in the Middle East still carries substantial uncertainty. The Strait resuming operations remains far off with no clear path. Deliveries of Middle East crude to Asia have already been interrupted. In the short term, balance is achieved by consuming inventory oil and sanctioned oil, as well as by having refineries reduce production load. However, the finished oil market lacks supply redundancy and is already in a stage of demand destruction. If the strait remains blocked, spot crude prices would break above $200 per barrel, while finished oil prices could break above $300 per barrel.

Middle East petrochemical facilities hit one after another

The war situation in the Middle East is heating up again. The Jubail industrial zone targeted this time is one of the world’s most important petrochemical production bases. It has an annual output of roughly 60 million tons of petrochemical products, accounting for about 6% to 8% of global total production.

Multiple large petrochemical companies and projects are concentrated in the area. Among them, Saudi Basic Industries Corporation (SABIC) is one of the largest investors. The Sadara project, in which U.S. Dow Chemical participates, and the projects co-invested by Saudi Aramco and France’s TotalEnergies are located in this industrial zone.

Previously, according to a report by Xinhua, on the 6th Israel Defense Forces issued a statement saying that on that day it carried out an airstrike on a large petrochemical integrated facility in the Asalouyeh area in southern Iran. The facility is Iran’s largest petrochemical integrated complex. The statement said that the Israeli side had struck Iran’s two major petrochemical integrated complexes, dealing a severe blow that affected more than 85% of Iran’s petrochemical product export capacity.

According to an incomplete count by a reporter from First Finance, since the Israel-Iran war involving the U.S. and Israel broke out on February 28, Middle East oil and petrochemical facilities have suffered systematic attacks one after another, putting the global energy supply chain to a severe test.

Earlier, on April 4, the U.S. and Israel launched large-scale airstrikes on a petrochemical hub in Iran. As reported by CCTV News, on April 4 the U.S. and Israel attacked the Mahshahr petrochemical economic special zone in Iran, and personnel of all active industrial units in the zone were evacuated.

Beyond energy products, disruptions to natural gas supply also cannot be ignored. Tracing back to March 18, as reported by CCTV News, on that day the Israel Defense Forces attacked the “largest natural gas facility” located in Bushehr in southern Iran. The facility processes 40% of Iran’s natural gas. Iran subsequently issued a warning stating that energy facilities in Saudi Arabia, the UAE, and Qatar became “lawful attack targets.”

A research note from Guoxin Securities said that more than 90% of Qatar and the UAE’s LNG exports pass through the Strait of Hormuz, accounting for 19% of global LNG trade. At the same time, key natural gas fields in Qatar and Iran have been damaged to varying degrees, leading to reduced output or even shutdown. It is currently not possible to route these LNG cargoes to other markets through alternative routes. High natural gas prices will seriously affect Europe’s manufacturing competitiveness.

Severe blow to the global petrochemical supply chain

Even more severe is that the prospects for passage through the Strait of Hormuz remain unclear.

According to CCTV News, Iran’s parliament’s National Security Committee has begun reviewing a plan for controlling the Strait of Hormuz. A spokesperson for Iran’s parliament’s National Security Committee said that a strategic action plan to ensure the safety of the Strait of Hormuz and the Persian Gulf is on the agenda.

“A number of energy facilities in the Gulf region have been hit one after another over the past month or so. Coupled with the continued obstruction of passage through the Strait of Hormuz, the global chemical goods supply chain is facing a dual test of supply contraction and demand destruction.” A futures analyst told a reporter from First Finance. The analyst said that the evolution of the geopolitical situation is still the biggest variable in the near-term market, and that going forward the progress of restoration of navigation through the strait and the assessment of damage to related facilities should be closely watched.

The futures professionals also noted that even if the Strait of Hormuz reopens, due to the cycle needed for oil transport, the market would still need several weeks to rebalance, and the related supply chain would also take time to return to normal.

Guoxin Securities’ analysis said that since late February 2026—when the U.S. and Israel jointly launched military strikes against Iran—followed by Iran’s closure of the Strait of Hormuz, the total reduction in crude oil output in the Middle East is roughly about 10 million barrels per day, accounting for 10% of global demand. Currently, the global crude oil supply gap is about 5 million barrels per day. As remaining storage capacity keeps shrinking, the output reduction scale by Gulf countries is expected to continue expanding. The restart cycle would lengthen from several weeks to several months.

However, the impact of high oil prices is not “indiscriminate.” An analysis by CICC said: first, countries with diversified energy sources and alternative options (such as China and the U.S.) have natural immunity; second, companies with strong cost absorption capabilities and high supply-chain resilience can benefit by expanding market share when competitors’ capacities clear.

On the domestic market side, an analysis by E Fund said that sharp increases in energy prices in Europe, Japan and South Korea, among other places, raise production costs significantly, which may push overseas chemical production capacity to exit and accelerate. With diversified feedstock sources, mature coal-to-chemicals replacement processes, scale effects, and cost advantages, China’s chemical industry remains the segment with the strongest risk-resistance in the global chemical supply chain. The exit of overseas capacity is expected to bring long-term positive effects to China’s chemical market share and pricing power.

Foreign banks see oil prices up to $200

With fighting ongoing and the strait uneasy, oil prices are repeatedly being pushed higher.

Since the outbreak of the conflict, WTI crude oil futures have cumulatively risen by more than 64%. In March, they climbed to nearly $120 per barrel at one point. On April 7, the prices of Brent crude oil futures and WTI crude oil futures were both range-bound at high levels of $111 per barrel and $115 per barrel, respectively.

Based on this, Guoxin Securities expects a high possibility that international oil prices in April will continue to accelerate higher, with near-term prices potentially exceeding $120 per barrel. It also raised its forecast for the 2026 average prices of both Brent and WTI crude oil to $80 per barrel to $90 per barrel.

Foreign banks are even more aggressive in their judgments of oil prices under extreme scenarios. In its latest prediction, Macquarie Group said that if the Iran war continues through June and the Strait of Hormuz remains closed, oil prices could rise to a record high of $200 per barrel. Macquarie emphasized that the timing of reopening the strait and the physical damage suffered by energy infrastructure are the main factors determining the long-term impact on commodities.

Citibank expects that if supply disruptions last through late June, oil prices could surge to the “all-in cost” level of $200 per barrel. The so-called “all-in cost” includes not only the price of crude itself, but also the finished-oil premium calculated based on consumption weights.

Goldman Sachs believes that during a supply disruption period, the market will need to continuously increase risk premiums to generate precautionary demand destruction, thereby hedging the risk of shortages under long-term supply interruption scenarios. The firm expects that the average Brent crude oil price in March to April will reach $110 per barrel (previous forecast: $98 per barrel), up 62% from the full-year 2025 average.

Guangzhou Futures made judgments on specific products. For ethylene glycol: as the geopolitical conflict in the Middle East continues to intensify, supported by supply contraction, cost increases, and funding-market pressure, feedstock made from oil and coal remain strongly supported on the cost side. In the short term, geopolitical risk has not dissipated, so futures prices are expected to trade with a relative strength. For crude oil and PX: due to the reduction in long-term contracted supplies from Japan combined with the interruption of Middle East naphtha exports, Asian PX plants have successively announced force majeure, and the tight supply situation persists. For asphalt: before the situation substantially eases and the strait restores navigation, the asphalt market structure is expected to run on the strong side.

CITIC Jianxin also pointed out risks from a more macro perspective. The Iran situation continues to escalate and remains complex and changeable, and the market has been volatile repeatedly around negotiation signals. The next 2 to 3 weeks remain a high-risk period during which the situation may deteriorate sharply. The market is waiting for a bargain-hunting opportunity, and funds show a strong tendency to stay on the sidelines in the short term.

(This article comes from First Finance.)