Geopolitical Conflicts Disturb More Than Expected, Reshaping the Petrochemicals and Chemicals Sector

Geopolitics pushes oil and chemicals prices higher

Middle East fighting since late February has sent shockwaves through global oil and chemical markets, forcing a re‑pricing of risk and supply chains. Brent crude spiked to about $119.50 a barrel on March 9 — nearly a 95% rise from early‑year levels — before retreating toward roughly $90 by March 11, reflecting frantic repositioning by traders. It has been reported that the G7 will discuss joint releases from emergency oil reserves, and reportedly former US president Donald Trump signaled temporary waivers on some oil sanctions, moves that briefly roiled markets and underline how geopolitics now equals macro policy for energy prices.

Who benefits — and who pays?

China’s state oil giants — PetroChina (中国石油), CNOOC (中国海油) and Sinopec (中国石化), the so‑called “Big Three” or “三桶油” — plus oilfield services and shipping firms stand to see earnings upside as prices and avoid‑risk freight costs rise. Domestic brokers including Everbright Securities (光大证券) and Debang Securities (德邦证券) argue upstream oil and services will show long‑term value in a sustained risk premium, while coal‑to‑chemicals routes could reassert themselves as a strategic substitution when crude is dear. At the same time, downstream petrochemical producers face sharply higher feedstock and transport costs that will be passed through to a wide range of industrial chemicals.

Chemicals and fertiliser chains under strain

Supply tightness is not limited to fuels. The conflict threatens output from major Middle Eastern chemical exporters — notably methanol, urea, potash and olefins — and Europe’s energy‑intensive plants may be forced to cut runs if gas and power costs climb. Middle Eastern producers account for material shares of global potash and polyethylene exports; for example, Israel and Jordan together supplied about 8.8% of global potash in 2024. China, as the world’s largest potash consumer, is already seeing domestic chloride‑potassium prices remain firm and local producers such as Salt Lake Industry (盐湖股份) and overseas developers like Asia Potash/亚钾国际 and Oriental Tower/东方铁塔 positioned to benefit.

Risks and what to watch

Market commentators caution that much of the current rally is driven by fear: if the Strait of Hormuz remains closed longer than expected, inflation and commodity prices could surge and hit equity valuations; if hostilities ease, a “buy expectations, sell the fact” unwind is likely. Traders and investors should watch EIA inventory releases, shipping bottleneck reports around the Hormuz and policy signals from the US and Europe. For Western readers unfamiliar with China’s landscape: the resilience of the Big Three has been supported by rising output, tighter cost control and a domestic policy push to consolidate high‑value refining and chemical capacity while culling small, inefficient plants — a dynamic that will shape winners and losers as the crisis plays out.