Plastics market won’t normalize until 2027 as Iran war drags on

Brief optimism in June that the plastics supply chain would stabilize after a U.S.-Iran ceasefire and the reopening of the Strait of Hormuz has given way to renewed disruption. Fighting resumed in July, and analysts now say market normalization will not arrive until 2027 at the earliest.

Ceasefire Collapses, Shipping Falls to Spring Lows

The United States and Iran reached a preliminary agreement on June 15 to end hostilities and reopen the Strait of Hormuz, a critical corridor for global petrochemical trade. Ship traffic through the strait briefly recovered in late June and early July. But Iran declared the strait closed again after firing on a commercial vessel on July 11, citing continued Israeli operations in Lebanon and U.S. "bad faith".pbs+3

Vessel activity has since fallen back to the depressed levels observed during the war's early days in March, according to PortWatch data cited by Packaging Dive. The strait handles roughly 20 percent of the world's oil supply and billions of dollars in annual petrochemical exports.nypost+2

Production Losses Mount, Prices Surge

The conflict has removed an estimated 9.1 million metric tons of polyethylene production on an annualized basis — the equivalent of shuttering 18 global-scale plants — according to Esteban Sagel, principal and CEO at Chemical and Polymer Market Consultants. Polypropylene has lost about 3 million metric tons.packagingdive

Dow ↗ 1.60% reported second-quarter 2026 results on July 22 showing a 30 percent year-over-year local price increase in its Packaging & Specialty Plastics segment, which posted net sales of $6.4 billion, up 27 percent. Polymer prices overall have surged roughly 41–42 percent since the conflict began on February 28.polymerupdate+2

Corbin Olson, senior analyst at ICIS, said the price floor for polyolefins will be "higher than pre-conflict price floors" even after stabilization. "2027 is looking to be the more expected normalization timeline," Olson told Packaging Dive.packagingdive

Recycled Resins Gain Ground

The narrowing price gap between virgin and recycled plastics has opened doors for substitution, particularly in Europe and Asia, where supply chains were most exposed to Middle Eastern disruptions. Customers in those regions have been more willing to switch to recycled grades, which the conflict "demonstrated can serve as a regional supply source during periods of market uncertainty," Olson said.eco-business+1

U.S. demand for recycled resins has remained relatively flat, however, due to structural challenges around collection and processing infrastructure and converters' preference for material consistency. Analysts warn that even after hostilities end, damaged petroleum infrastructure in the Middle East means full recovery will take quarters, not weeks.packagingdive+1