News that the United States and Iran may resume talks has helped calm market sentiment in the short term, and oil prices have pulled back accordingly. But that does not mean the situation in the Strait of Hormuz has become less serious. Reuters reported that the U.S. military had already turned back six merchant ships under the new blockade framework, while overall traffic through the strait remains well below pre-war levels. Put simply, the headline mood has softened, but the physical market is still tight.
This matters because Hormuz is one of the world’s most important energy chokepoints. According to the U.S. Energy Information Administration, about 20.9 million barrels per day of oil moved through the strait in the first half of 2025. More importantly for Asian markets, around 89% of the crude oil and condensate that passed through Hormuz went to Asia, and China, India, Japan, and South Korea accounted for 74% of those flows. In other words, when Hormuz tightens, Asia feels the impact first and most clearly.
Table 1. Volume of crude oil, condensate, and petroleum products transported through the Strait of Hormuz (2020 - 1H25) Unit: Million barrels / day
Source: U.S. Energy Information Administration analysis based on Vortexa tanker tracking data.
Note: LNG = liquefied natural gas; 1H25 = first half of 2025.
Another important but less widely known point is that alternative routes are far too limited to replace Hormuz in full. EIA estimates that Saudi Arabia’s East-West pipeline and the UAE’s Abu Dhabi pipeline can together bypass only about 4.7 million barrels per day, while Iran’s effective bypass capacity is only around 0.3 million barrels per day. Against normal Hormuz flows of more than 20 million barrels per day, that fallback capacity is simply too small. So even if some cargoes are rerouted, the market still faces a major structural bottleneck.
The issue is no longer just about freight costs or market psychology. EIA said in its April Short-Term Energy Outlook that the Strait of Hormuz has been effectively closed to shipping traffic since February 28. It also estimated that oil-producing countries that rely heavily on the route, including Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain, shut in about 7.5 million barrels per day in March, with shut-ins expected to rise to 9.1 million barrels per day in April. That is a crucial point because it shows that the disruption has already moved into real lost production, not just delayed logistics.
Table 2. Estimated Strait of Hormuz closure-related disruptions in crude oil production (thousand barrels per day)
Another point that many readers may overlook is that even if tensions cool, the market cannot return to normal quickly. EIA said it still keeps a risk premium in its oil outlook because traffic recovery through Hormuz would still leave the market dealing with tanker backlogs, route adjustments, and the risk of renewed disruption. It also expects shut-ins to return close to pre-conflict levels only in late 2026, which means this geopolitical premium is not a story of just a few days.
To sharpen the argument further, the International Energy Agency has called this the largest oil supply shock in history and estimates that the conflict has removed about 1.5 million barrels per day of global oil supply. At the same time, it has reversed its 2026 demand outlook from expected growth of 640,000 barrels per day to a decline of 80,000 barrels per day. That combination is especially important: the market is now facing both a supply shock and the early signs of demand destruction caused by higher prices.
From a broader macro perspective, the IMF has also laid out more severe downside scenarios if the conflict lasts longer. In its adverse scenario, the IMF assumes oil prices rise by 80% relative to the January 2026 baseline starting in the second quarter, corresponding to an average petroleum spot price of about $100 per barrel in 2026, while gas prices in Europe and Asia rise by 160% relative to baseline. In a more severe scenario, the IMF says oil prices could rise to around $110 per barrel in 2026 and $125 per barrel in 2027, while gas prices in Europe and Asia could rise by 200% over the same period. These assumptions show that major institutions do not see this as a simple short-term event. They see it as a shock that could spill over into inflation, growth, and industrial costs.
What does this mean for chemicals and PU in Asia?
Against that backdrop, the key point for Asian chemicals and PU is that softer talk headlines do not automatically mean softer cost fundamentals. Even if the immediate panic has cooled, the broader Hormuz-related risk to energy, logistics, and replacement costs has not fully disappeared. That is why the question is no longer whether geopolitics can keep pushing polyols higher every day, but whether the current pullback still has room to extend before upstream cost support becomes visible again.
Graph 1. East China Flexible Slabstock Polyols Prices Softened from Recent Peaks but Stayed Well Above the January-February Base
China’s flexible slabstock polyols market is already showing that pattern. The PUdaily chart shows East China DEL prices rising from the low-CNY 8,000s/tonne in January-February to above CNY 14,000/tonne in late March and early April, before edging lower in recent days. That suggests the earlier panic-driven spike is losing momentum and the market has started to move into a correction phase. However, because current levels still remain far above the January-February base, and because the wider cost backdrop has not fully normalized, the correction should be read as a high-level adjustment rather than a full bearish reset.
This interpretation remains broadly consistent with upstream cost signals, but the balance has started to shift. While PO had previously stayed firm enough to slow a deeper correction, the latest market update shows East China DEL propylene oxide bulk spot prices at CNY 12,150 – 12,500/tonne, down CNY 1,025 on the day. That move matters because it suggests some of the cost-side pressure supporting polyols has started to ease alongside softer sentiment. In other words, the market is no longer only struggling to sustain earlier high prices because demand support is moderate; it is also beginning to see a little more room open up on the upstream side.
If the current environment remains de-escalated and headlines continue to point more toward negotiation than renewed escalation, polyether polyols could continue to move lower in a relatively orderly manner in the near term, especially this week. That would still look more like a controlled normalization from elevated territory than a sharp collapse, because replacement costs remain above the old base and the broader physical risk around Hormuz has not fully disappeared. But compared with the earlier phase, weak demand support now appears increasingly unable to defend high numbers on its own.
In this kind of market, the most important signal is often not the weekly headline direction, but the daily shape of the correction: whether prices keep slipping, stabilize into a new plateau, or stop falling once cost support comes back into focus. That is often the point where close day-to-day market tracking becomes more useful than broad directional assumptions.
References
Reuters. Six ships turned around as part of Strait of Hormuz blockade, US military says.
Reuters. Oil prices fall for a second day on expectations US-Iran talks may resume。
Reuters. Strait of Hormuz traffic barely affected on first day of US blockade, data shows.
Reuters. US, Iran may resume talks this week despite port blockade.
U.S. Energy Information Administration. World Oil Transit Chokepoints analysis.
U.S. Energy Information Administration. Short-Term Energy Outlook.
Reuters. IEA warns Iran war oil shock will cut supply, cause demand to shrink.
International Monetary Fund. Chapter 1: Global Prospects and Policies, April 2026 World Economic Outlook.