The spillover effects of high oil prices become evident, testing all links in the industrial chain.

Securities Times Reporter Xu Xiaoru and Wei Shuguang

The sudden escalation of the Middle East situation has caused unprecedented and intense shocks to the global energy markets, also putting severe pressure on various segments of the industrial chain.

Since March, international oil prices have surged from around $70 per barrel, reaching nearly $120 at their peak, then rapidly falling back to around $80, creating an epic rollercoaster. On March 12, Brent crude oil prices again broke through $100 per barrel intraday, with 12 domestic energy and chemical futures hitting the daily limit early in the session, and the Wenhua Commodity Index reaching its highest level in nearly two years.

The Strait of Hormuz in the Middle East, known as the world’s energy artery, if cut off, would fundamentally alter the pricing logic of global energy, chemicals, agriculture, and even macro financial assets. In response to this round of oil price shocks, Securities Times reporters recently interviewed multiple futures analysts, traders, and industry insiders to trace the transmission path of the commodity markets under the impact of geopolitical conflict.

Trading Mechanisms Amplify Volatility

As a critical chokepoint for global energy transportation, the Strait of Hormuz handles key shipments of petrochemical raw materials to Asia. Data shows that by 2025, about 60% of naphtha imports, 45% of liquefied petroleum gas (LPG), and around 50% of methanol imports in Asia depend on this route. If blocked, the energy supply chain will quickly come under pressure.

Since the U.S. and Israel’s attack on Iran, international oil prices have risen sharply within just over ten days. On March 9, Brent crude futures hit a high of $119.50 per barrel intraday, a four-year high. Then, prices plunged back above $80, creating an extreme “rollercoaster” pattern. On March 12, fears of supply disruption resurfaced, pushing Brent futures above $100 again, reigniting bullish sentiment in the domestic commodities market, with 12 energy and chemical products hitting the daily limit, including PTA, PX, bottle chips, short fibers, and ethylene glycol. However, in the afternoon, many of these gains narrowed, with only para-xylene closing at the limit.

Ping An Futures analyst Li Chenyang believes that the core logic behind this surge in oil prices is the “certainty of supply contraction” driven by the escalation of Middle East tensions, with the blockage of the Strait of Hormuz being the key trigger. “The current conflict is no longer just an emotional disturbance but is beginning to profoundly change the pricing logic of crude oil and even global macro assets through tangible supply shocks.”

Guangfa Futures researcher Zhang Xiaozhen also pointed out that the main variable in current oil price movements is the navigation status of the Strait of Hormuz. “If the strait reopens, oil prices are likely near a cyclical top; but if the blockade continues, as inventories deplete, the market will send clear warning signals: first, a persistent widening of spot premiums and a strengthening of futures spreads; second, a further increase in the correlation between downstream chemical prices and crude oil, with volatility potentially exceeding that of crude itself.”

However, Zhang believes this extreme scenario requires multiple conditions to occur simultaneously, including a blockade lasting over a month and the conflict spreading to key oil-producing countries in the Middle East. Currently, the probability of such scenarios is decreasing. On one hand, rapid oil price increases will significantly boost global inflation pressures, possibly prompting major economies to release strategic petroleum reserves. On the other hand, oil exports are Iran’s economic lifeline, and a prolonged blockade would severely impact its economy.

Meanwhile, financial market trading mechanisms have also amplified oil price volatility. Previously, silver experienced a single-day plunge of 35%, and the current sharp fluctuations in oil prices are similarly accompanied by short-selling pressure and the effects of quantitative trading.

Li Chenyang states that when a geopolitical shock triggers, quantitative trading strategies tend to further amplify crude oil price swings. In a highly directional market, trend-following quantitative strategies almost inevitably contribute to price increases or decreases. When oil prices break through key psychological levels like $90 or $100 per barrel, many models trigger buy signals simultaneously, leading to large-volume orders that accelerate the upward slope.

Downstream Chemical Markets Worry About Supply Disruptions

The impact of transportation disruptions has quickly propagated through the chemical industry chain. Reduced efficiency in the Strait of Hormuz will first affect raw material arrivals and then rapidly transmit to the cracking end.

According to ICIS, the average operating rate of ethylene plants in Northeast Asia is expected to fall from 83% in February to 73% in March. Meanwhile, spot chemical prices have surged sharply; over the past week, PX prices increased by more than 22%, PTA prices by over 20%, with Sinopec’s PX spot price rising by 400 yuan/ton to 8,600 yuan/ton on March 9. However, as oil prices retreated, chemical prices also saw some correction on March 10.

“Domestic plastics and chemicals industry prices, which previously quoted around 10,000 yuan/ton, have now dropped back to about 8,000 yuan/ton,” said Ye Chen, assistant general manager of Jaye Petrochemical Group, a major energy and chemical trader. “In just one day, the fundamentals didn’t change much, but market sentiment fluctuated greatly—more than the futures market. Most of our inventory was hedged via futures, so although spot prices rose more than the futures, hedging helped us avoid significant operational risks.”

However, the company still faces considerable pressure amid such volatile markets. “We prepared sufficient margin for our hedging positions in advance; otherwise, in extreme conditions, forced liquidation could occur. For small private firms with limited capital, this is crucial,” Ye said.

In contrast, many spot traders are more concerned about potential supply shortages.

A plastic company manager in Hangzhou said they had activated force majeure clauses in contracts, negotiated price increases with clients, and extended some delivery times.

Zhang Xiaozhen emphasizes that in the current environment of high volatility, hedging strategies should focus on “optimizing structure rather than simply increasing positions or stop-loss.” For downstream industries, it is advisable to adopt a “front-month dominant, longer-term supplementary” contract structure to avoid missing cost transfer opportunities. If hedged positions incur unrealized losses, it is not advisable to blindly cut losses but rather to extend contracts or roll over to lock in long-term costs.

Supply Shocks Spread to More Commodities

The supply shocks originating from the crude oil market are spreading to more commodities.

Refinitiv data shows that on March 9, the global benchmark for thermal coal—ICE Newcastle coal futures for the next month—rose about 9.3%, reaching $150 per ton, the highest since November 2024. Compared to February 27, before the Middle East escalation, prices have increased by approximately 28%. European markets also reacted strongly, with Rotterdam coal prices reaching $119.50 per ton, a 52-week high.

Additionally, fertilizer markets have experienced notable volatility.

Iran is a major exporter of nitrogen and phosphate fertilizers. Tensions in the Middle East have rapidly tightened global fertilizer supplies. Last week, U.S. urea prices rose to $550 per ton, up about $70 in a week.

This has begun to impact agriculture markets. Yang Lulin, chief analyst at Guomao Futures Agricultural Products, states that the core logic of vegetable oil prices remains the “oil—biodiesel—vegetable oil” transmission chain. When crude oil remains high, vegetable oil prices tend to rise and are difficult to fall, similar to the market during the Russia-Ukraine conflict in 2022. However, if geopolitical tensions ease and oil prices fall sharply, vegetable oil prices could also see significant corrections.

Meanwhile, rising fertilizer prices may alter global crop planting structures. “Soybeans have nitrogen-fixing properties and are less dependent on fertilizers. If fertilizer prices continue to rise, U.S. farmers might shift some corn planting areas to soybeans in the spring of 2026, affecting the long-term supply pattern of agricultural products,” Yang said, noting that the market is closely watching the upcoming USDA planting intentions report.

Sustained High Oil Prices May Weigh on the Global Economy

From an industry chain perspective, cost transmission shows clear differentiation.

Zhang Xiaozhen notes that current cost transmission features “upstream smooth, mid- and downstream constrained.” Upstream sectors like oil, gas, and PX have achieved high cost pass-through, with full transfer largely realized; midstream sectors like polyester and synthetic rubber have somewhat lower transmission rates, with companies absorbing some costs through squeezed processing fees; downstream sectors such as textiles, home appliances, and automobiles are limited by weak demand recovery and are less able to pass on costs, resulting in lower transmission.

“If oil prices stay above $100 per barrel for more than a month, many small and medium-sized enterprises may face production cuts or halts, prompting a rebalancing of supply and demand in the industry chain. When terminal demand for chemical products begins to weaken, the expected disruptions in supply will diminish, and the market may shift focus to demand-side trading and transmit back upstream,” Zhang said.

Li Chenyang believes that the key to high oil prices’ impact on the global economy lies in their duration. “A short-term rise over a few weeks mainly affects market sentiment, but if prices stay near $100 for two to three months, it will significantly raise transportation and manufacturing costs and erode consumer purchasing power.”

Caution is warranted that sustained high oil prices could force global central banks to tighten monetary policy again, creating a “resonance” with high energy costs and accelerating economic downturns.

“If the supply crisis cannot be alleviated in the coming weeks and oil prices remain above $110 per barrel into the second quarter, the probability of a global recession in the second half of the year will increase significantly,” Li warned.

Additionally, persistently high oil prices will accelerate energy transition efforts. In recent years, amid multiple energy crises, global companies have shifted from “passive response” to “active transformation.” Shipping, chemicals, and other industries are exploring diversified energy alternatives, with some energy-intensive firms accelerating solar and wind projects and trading green electricity to reduce costs.

However, Zhang emphasizes that energy transition is a long-term process. In the short term, companies should continue using futures hedging, raw material substitution, and cost reduction measures to cope with high oil prices while seizing structural opportunities brought by the transition. In the long run, high oil prices will continue to push industry optimization and accelerate the shift toward cleaner, diversified energy structures.

(End of translation)