Goldman Sachs: A global chemical crisis is erupting, with an impact twice that of the 2022 energy crisis!

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Obstructions in the Strait of Hormuz are triggering an unprecedented global shock to chemical supplies.

According to the latest Goldman Sachs report, the prices of basic chemical products have soared by over 60% in recent weeks, setting a record for the fastest increase ever, with both the speed and scale of price hikes double those seen during Europe’s 2022 energy crisis. Currently, about 20% of global chemical supply has been disrupted. Supply is unlikely to recover in the short term, and physical relief of chemical products in Europe and Asia may not occur until the third quarter of 2026 at the earliest; prices face further upward risk.

On the cost side, the surge in petrochemical derivatives is having an average impact of about 11% on the cost of goods sold (COGS) for European and American companies, with the furniture, medical beauty, and apparel industries being hit the hardest. There is a lag of 6 to 12 months before this filters through to end consumers, with the peak of price pressure expected in the third or fourth quarter of 2026. The market is severely underestimating the depth and breadth of this shock; investors need to stay alert.

Shock Intensity: Faster, Stronger, and Broader Than the 2022 Energy Crisis

Compared with the 2022 European energy crisis, this crisis is fundamentally different in terms of speed, scale, and geographic scope.

The 2022 crisis was a gradual shock, mainly impacting European natural gas, which only accounts for 10%-15% of chemical production costs. This crisis is a sudden leap, directly hitting oil and naphtha—both core raw materials for the global petrochemical industry, together accounting for about 70% of production costs.

In terms of price trends, taking week 15 after the outbreak of the conflict as a benchmark, both the increase and speed of the chemical product contract price index this time are twice those seen in the same period in 2022, significantly surpassing the European market’s performance that year.

This shock is particularly severe for the Asia-Pacific region. About 70% of the raw materials needed for chemical production in this region rely on imports from the Middle East, much higher than Europe’s 20%. Moreover, the Asia-Pacific region is the core production area for global chemicals—accounting for about 65% of global output and about 51% of manufacturing value added. This means that a cutoff in Middle Eastern raw material supplies will directly impact the hub of global supply chains.

Chemical Shockwaves: Spreading from Low Value-Added Industries to Semiconductors

About 20% of global chemical supplies have been disrupted, with signs of profit compression, production cuts, plant shutdowns, and shrinking demand increasingly evident in Asia and Europe.

As the global manufacturing hub, Asia is facing the most severe supply shock in recent years. Multiple petrochemical plants have already been reduced to minimal operating rates (50%-60%), and as inventories are further depleted, some face shutdown risks.

The shock has spread from low value-added industries such as textiles, packaging, and auto parts to high-value sectors like construction and South Korean semiconductor and memory chip production. The latter faces risks of raw chemical solvent shortages, while these solvents are typically by-products of basic chemical production rather than standalone production streams.

Timeline for Supply Recovery: Even If the Conflict Ends Immediately, Normalization Will Not Occur Before 2027 at the Earliest

Supply recovery will be a lengthy process. Even if the Strait of Hormuz reopens immediately, petrochemical raw materials destined for Asian or European cracking facilities will face multiple delays: about 30 days for security clearance, 30 days to clear shipping backlogs, about 25 days for transport to Asia or Europe, about 10 days for port congestion, and about 45 days to restart cracker units—a total of roughly 140 days. This means that in the most optimistic scenario, physical raw material supply relief would not arrive until mid-to-late May 2026; with added friction, it could be delayed until mid-September.

Dow Chemical estimates that the impact will last well past the end of the conflict—with petrochemical supply chains taking about 250 to 275 days to return to normal. Chemicals and raw materials will be behind oil, fuel, and fertilizer in the order of clearing shipping backlogs in the Strait of Hormuz, facing a "double queue" dilemma.

Overall, physical supply relief for chemical products in Europe and Asia is not expected before Q3 2026, which will further push up chemical prices, aggravate supply chain disruptions, and trigger a deeper demand contraction.

Impact of Petrochemical Price Increases Varies by Industry, With Consumer Pass-Through Delayed by 6-12 Months

The effect of petrochemical derivative price hikes on the cost of goods sold for European and American companies varies by industry. Estimates show an average COGS increase of about 11% across industries, but with significant sectoral differences.

Furniture, medical aesthetics, and apparel are the hardest hit industries, with COGS increases of 20%, 18%, and 15%, respectively; autos and consumer electronics rise by 11% and 7%, respectively; pharmaceuticals by 10%; food and beverages are less affected, rising by 3% and 4%. Notably, these estimates only account for the rise in petrochemical prices and do not include increases in other raw material, logistics, or energy costs.

As Asian supply chains tend to be shorter while European and American enterprises mostly use quarterly, half-year, or annual pricing contracts, peak shocks for European and American companies are expected to occur in the third or fourth quarter of 2026. Some may take early action to proactively respond to inflation and supply interruptions.

The average inventory coverage period across industries is about 3.7 months, with an average lag of 6-12 months before being passed onto consumers. The auto industry has the longest lag (9-18 months), with most car companies expecting limited actual impact in 2026; the apparel industry has a shorter lag, about 3-6 months.

Goldman Sachs Warning: The Market Underestimates the Risk as Left-Tail Scenarios Become the Baseline

Goldman Sachs issued a clear warning at the end of their report.

"Our recent discussions with investors show that warning signals from the petrochemical industry have been noticed but have not yet been fully appreciated, largely because the shock has not been directly felt yet."

Goldman Sachs believes that chemical raw materials must immediately resume circulation; otherwise, the severe supply chain disruptions and dramatic demand contraction of a "left-tail scenario" will no longer be a low-probability event but will become the baseline scenario.

With every day the Strait of Hormuz remains blocked, the supply shock to the global chemicals industry and manufacturing continues to intensify. Investors need to reassess their exposures in consumer goods, manufacturing, chemicals, and related supply chain sectors, and must prepare for the cost pressures and inflation risk that may emerge in the second half of 2026.

Risk Warning and DisclaimerThe market contains risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinion, viewpoint, or conclusion in this article is suitable for their specific circumstances. Investment is at your own risk. ```