Israel-Iran conflict rattles chemical markets

The recent conflict between Israel and Iran sent shockwaves across the chemical industry in the Middle East. Israel did not directly target Iran's substantial chemical sector, but there were significant indirect impacts that caused Iran to shut down much of its chemical production. Iran, however, did target Israel's refining and petrochemical industry, forcing plants offstream.

Despite the June 24 ceasefire, chemical plants across the region remain idle, and volatility and uncertainty has persisted in fertilizer, feedstock and chemical markets.

In Israel, Bazan Group's refinery and petrochemical complex at Haifa shut following a second missile strike from Iran, the company said in a stock exchange filing June 16.

Bazan said the refinery's units and downstream petchem plants were idled because of damage to a power plant. "As of now, all the facilities of the company and of subsidiary companies have been shut down," Bazan said in the filing.

The company said it was working with the Israel Electric Corp. to restore power.

Carmel Olefins Ltd., a subsidiary of Bazan, operates olefin and polyolefin plants at the Haifa refinery complex. Another Bazan subsidiary, Gadiv Petrochemical Industries Ltd., makes aromatics, phthalic anhydride and solvents at the complex.

Carmel Olefins operates a steam cracker with capacity of 240,000 mt/year of ethylene and 135,000 mt per year of propylene, according to the company's website. It also has a metathesis plant with an additional 180,000 mt/year of propylene capacity, and it has 180,000 mt/year of polyethylene and 400,000 mt/year of polypropylene capacity.

Haifa impact

Some of the Haifa refinery complex's petroleum and petrochemical products are exported to Mediterranean markets, including Cyprus, Turkey and Greece.

Meanwhile, in Iran, Israeli attacks on the upstream oil and gas sector, refineries, power grids and port infrastructure disrupted chemical production. The most significant incident was a drone attack June 14 on gas-processing units at the South Pars gas field that are linked to Assaluyeh, Iran's main chemical production hub.

The authorities ordered chemical plants in the Assaluyeh area to halt production and clear hazardous materials out of tanks in case of further attacks.

The methanol plant of Marjan Petrochemical Co. at Assaluyeh was shut June 15, as was Bushehr Petrochemical Co.'s methanol unit at Assaluyeh, sources close to the companies told Platts, part of S&P Global Energy. The Marjan and Bushehr plants each have capacity to produce 1.65 million mt/year of methanol.

Another three methanol plants in Iran, including the Zagros Petrochemical Co. facility at Assaluyeh, could also be offstream, according to Energy analysts.

Methanol facilities in Iran also face insufficient natural gas feedstock supply following the Israeli air strikes on Iran's energy infrastructure, including the attacks on the South Pars gas field, market sources said.

Ammonia production at plants across Iran is also on hold, sources told Platts. Output of ammonia and downstream products, including nitrogen fertilizers, was widely reported on June 16 to have stopped. This was confirmed to Platts by sources close to producers Razi Petrochemical Co., Pardis Petrochemical Co. and Hengam Petrochemical Co.

Key infrastructure

Chemicals are Iran's third-largest export segment, behind crude oil and refined products, making up about a third of all nonoil exports by value, according to Energy. The country has about 85 chemical plants in total, according to Energy.

The industry is based on abundant locally sourced feedstocks, including natural gas, condensate and NGLs streams that are used for production of commodity chemicals and derivatives including ethylene and PE, methanol, ammonia and aromatics.

The country has 12 crackers with a total nameplate ethylene capacity of 7.88 million mt/year. It is the second-largest producer of ethylene in the Middle East, representing 23% of regional capacity, after Saudi Arabia, according to Energy.

Iran also has 13 methanol plants with a total capacity of 17.38 million mt/year, and 21 PE plants with a total capacity of 4.45 million mt/year, according to Energy.

The country's domestic petchem consumption is about 13 million metric tons annually, with exports representing two thirds of Iran's production, according to National Petrochemical Co. (NPC; Tehran).

Petchems are subject to US sanctions on Iran, so Iran exports large volumes to other key markets such as China, India and Turkey.

Iran was the top supplier in 2024 of low-density PE to China, with 552,940 metric tons shipped, according to China Customs statistics. From January to April 2025, it ranked third, delivering 151,954 mt.

The country exported 763,147 mt of ammonia in 2024, according to Iranian foreign ministry data, with 691,338 metric tons shipped to India and 50,654 metric tons to Turkey, largely for fertilizer production.

Iran's other main petchem hub, apart from Assaluyeh, is at Mahshahr.

Iran's state-owned enterprises, including NPC, have announced plans to invest $15 billion to boost the country's petchem production to 110 million mt/year in the coming years from about 97 million mt/year currently.