The Middle East conflict has disrupted more than just energy exports. With the flow of goods through the Strait of Hormuz slowing to a mere trickle, the world’s supply chains, from fertilisers to chemicals, have been under strain, pushing up prices and weighing on global growth.
by Christine Arriola, Seung-Hee Koh, Catherine MacLeod, OECD Economics Department
The importance of the Persian Gulf economies for the supply of oil and natural gas is well known. Collectively, the economies produced 27% of global crude oil in 2024, and 40% of global liquid natural gas. But, as shown in the June OECD Economic Outlook, the Persian Gulf economies are also globally important exporters of many key industrial chemicals and materials as well (Figure 1, Panel A). Given abundant resources of petroleum and natural gas, they are also important exporters of by-products from oil and gas processing (such as methanol and sulphur), and manufactured products that benefit from cheap natural gas, including fertilisers and fertiliser inputs such as urea and ammonia.
The number of vessels carrying goods such as petrol, sulphur and urea from the Persian Gulf to the rest of the world fell from 57 a day in February to just 14 in March and April before recovering to 23 in May 2026, with the Middle East conflict restricting traffic through the only viable water transit route for many products, the Strait of Hormuz (Figure 1, Panel B). This severely restricts the exports of these key goods to other countries.
Figure 1. The Persian Gulf’s supplies of key world goods exports have been severely constrained
The range of supply chains affected by these disruptions is potentially very broad, stretching from cars to copper mining, and from maize to medical equipment. The Gulf supplies 35% of the world’s helium exports, which is used to produce semiconductors and medical imaging instruments such as MRIs. Just over half of global sulphur exports and a third of urea exports come from the Gulf. Both products are important for fertiliser and food production, whilst sulphur, once converted to sulphuric acid, is needed for a range of processes, including to process nickel for electric vehicles and process low-grade copper ores. The region exports just over 20% of the world’s traded polyethylene and polypropylene chemical compounds, with polypropylene used for packaging, pipes, medical goods and car parts, and polyethylene used for packaging, bottles and electrical insulation.
The exposure of individual countries to disrupted supply from the Persian Gulf varies considerably. Countries such as India and Singapore are heavily dependent on the Gulf for their supply of key non-energy imports (Figure 2). More broadly, all major importers of Gulf products tend to have a high dependence on the Gulf. The Gulf economies supply between 50 to 90% of the imports of sulphur, methanol and rare gases in their major export markets. A similar pattern holds true for urea and ammonia. For petrochemical compounds, phosphate fertilisers and aluminium, the top five export markets typically have 20‑40 per cent of their imports provided by the Gulf economies.
The overall importance of Gulf production for global supply caused global prices for these goods to rise sharply between February and May (Figure 3, Panel A). The shock to prices was pronounced, reflecting the lack of alternative transport routes from the Gulf – many of these products become economically unviable if transported via air or road. Alternative suppliers are not always easy to find at short notice. In addition, in the short term it can be difficult for end users to use alternative products when equipment is highly specialised – for example, there are alternatives to polypropylene, which is used widely for car interiors, but existing machinery cannot easily switch to using other inputs. In the absence of sufficient inventories, these price increases push up input costs and ultimately selling prices, adding to inflationary pressures. Delays in securing alternative supplies can also increase supply chain pressures, which have risen since the escalation of the Middle East conflict (Figure 3, Panel B).
Figure 3. Price increases and supply constraints raised supply chain pressures
What can governments do?
Countries need to find ways of engaging co-operatively to cope with global supply shocks. Efforts to support free trade and safe passage through key transport corridors are needed to support the flow of goods disrupted by the conflict. Export restrictions should be avoided, as they tend to exacerbate global shortages and price increases.
Inventories are helping to mitigate the current shock, at least in the short term. National stocks of key products can also help when private costs are prohibitively high. However, lessons from the pandemic show that efforts to accumulate inventories in times of crisis can also exacerbate global supply shortages (OECD, 2023). International co-ordination to align stockpiling strategies as well as long-term planning can help to mitigate these risks (OECD, 2023).
Over the longer term, governments should support efforts to reduce critical dependencies by developing alternative technologies to better ensure resilience. Continuing to encourage firms to diversify both suppliers and buyers will help to improve overall resilience to shocks.
References
OECD (2026), OECD Economic Outlook, Volume 2026 Issue 1: Under Pressure, OECD Publishing, Paris, https://doi.org/10.1787/2d1956f0-en.
OECD (2023), Ready for the Next Crisis? Investing in Health System Resilience, OECD Health Policy Studies, OECD Publishing, Paris.
Pilgrim, G., Y. Dorville and A. Mourougane (2026), “Monitoring global trade by products, using Big Data”, OECD Statistics Working Papers, No. 2026/02, OECD Publishing, Paris.