Oil Shock from Iran War Triggers Asian Plastic Shortage, Pressuring Industries and Spurring ‘Middle East Plus One’ Supply Chain Shift

(SeaPRwire) –   Asia’s oil crisis is rapidly escalating into a widespread material shortage, with declining stocks of plastics impacting industries ranging from food production to medical equipment.

The region relies on imports for approximately 70% of its naphtha supply—a key petrochemical feedstock used to produce polymers such as polyethylene (PE) and polyethylene terephthalate (PET). These materials are essential inputs for everyday items like food packaging, cosmetic containers, plastic bags, and medical consumables. Since the Iran war began and access to critical shipping lanes through the Strait of Hormuz has been disrupted, prices for these plastics have surged dramatically.

“The stability of plastic as a fundamental industrial material has been compromised,” states Chen Ping-Kuo, a professor in industrial engineering and management at Japan’s Ritsumeikan Asia Pacific University (APU). He emphasizes that because Asian economies depend heavily on plastic, any disruption will “quickly ripple through supply chains.”

On April 20, South Korea’s health authorities launched a nationwide investigation into intermediaries and companies suspected of hoarding syringes. Other medical supplies produced from oil-based chemicals—including needles and gloves—are also affected by the shortage.

Just as the COVID-19 pandemic prompted businesses to adopt a “China plus one” strategy to reduce reliance on Chinese manufacturing, the ongoing conflict in the Middle East may drive a shift toward a “Middle East plus one” approach, aiming to diversify away from dependence on vulnerable chokepoints like the Strait of Hormuz. “If this disruption continues for a year or longer, significant adaptations will likely occur,” says Li Dong, a supply chain expert from Singapore’s Nanyang Technological University. “Producers not reliant on the Strait—such as China and others—will gain greater influence.”

Which sectors are most affected by the plastics shortage?

Petrochemical-based products, including plastics, are embedded throughout the modern economy—used in packaging, consumer goods, semiconductors, and notably, healthcare.

“Hospitals and clinics are stockpiling extra supplies in anticipation of price increases, which is creating artificial shortages,” explains Jung Chul-woo, a representative from the Korea Medical Devices Association. The situation is equally concerning in Taiwan, where plastic product prices have risen up to 40%, according to the Straits Times.

In the healthcare sector, shortages of polypropylene and PVC are limiting the availability of syringes, intravenous (IV) bags, and sterile packaging. “What starts as a petrochemical shortage can quickly become a public health threat, especially in countries with already strained healthcare systems like India, Indonesia, and the Philippines,” warns Li.

He identifies the food industry as particularly vulnerable. “In many Asian nations, plastic packaging helps compensate for inadequate cold-chain infrastructure by extending shelf life, supporting transportation, and reducing spoilage,” he notes. When packaging becomes scarce or more expensive, food waste rises, logistics costs increase, and higher prices are passed on to consumers.

For example, Malaysian dairy brand Farm Fresh reported to the Straits Times that a shortage of PET resin—commonly used in beverage bottles, food containers, and packaging—led to empty shelves of its milk cartons in supermarkets.

A silver lining? Recycled plastic is gaining momentum

Manufacturers of recycled plastic and alternative packaging solutions—such as paper, bamboo, and bagasse-based materials—are experiencing unexpected growth as firms seek substitutes for conventional plastics.

According to Li from NTU, the price of recycled plastics has already soared from an average of $400 per ton before the crisis to $1,600 per ton today. Virgin plastics have also seen sharp price hikes—from $950 per ton pre-crisis to over $1,800 per ton currently.

“The narrowing gap between virgin and recycled plastic prices is transforming investment dynamics across Asia,” observes Chen of APU. “Historically, recycled plastics faced challenges due to high costs and inconsistent quality, while cheap virgin materials suppressed demand. But now, as virgin plastic prices rise due to energy, logistics, and geopolitical pressures, recycled alternatives are becoming more economically viable.”

Nevertheless, Li cautions that the recycling industry remains “underdeveloped,” pointing to issues such as fragmented collection networks, contamination problems, and rising operational costs.

Winners and losers

The naphtha supply shock is expected to disproportionately impact small- and medium-sized enterprises compared to larger corporations. “Big companies typically have access to financial tools like hedging, long-term contracts, inventory buffers, and even capacity to invest in alternative materials; most smaller manufacturers do not,” notes Chen of APU.

If the supply crunch persists, Asia could see increased closures and consolidation among smaller producers, while larger firms may expand their market share. This trend is likely to be most evident in low-margin industries such as plastic toys, packaging manufacturing, and basic consumer goods.

However, the effects of Asia’s plastics shortage will not remain confined to the region. “As petrochemical costs rise in Asia, the consequences will eventually reach global brands and retail markets in Europe and the United States, increasing procurement expenses and extending lead times,” explains Chen.