On August 30, 2026, the U.S. military launched a new round of strikes on Larak Island near the Strait of Hormuz, and Iran subsequently retaliated against a U.S. military base in Jordan, abruptly escalating regional tensions once again.
The strait's closure underscores its status as a core hub that alternative routes cannot replace
Affected by the escalation, conventional commercial tankers and large bulk carriers have effectively suspended transits through the Strait of Hormuz, with recent daily crossing volumes plunging far below historical averages. AIS (Automatic Identification System) data from August 31 confirmed the sharp contraction in traffic, with only 11 vessels recorded crossing the strait that day. The vessel mix was dominated by small Iranian- and Indian-flagged cargo ships and auxiliary vessels, reflecting that major international commercial carriers have largely withdrawn from spot transits amid soaring war-risk insurance premiums and actual military exchanges; traffic flows have fallen to extremely low levels. Although neighboring oil producers such as Saudi Arabia and the UAE have activated some onshore pipelines and Red Sea alternatives, including Yanbu port, to divert crude exports, these cannot fully replace the Strait of Hormuz's core hub status in the short term.
Capital markets are now pricing in both "physical friction costs"and "geopolitical risk premiums"
After the latest escalation, international energy markets reacted quickly. Brent crude rose $2.21 to $90.31/bbl, and WTI rose $1.83 to $85.23/bbl. During Asian trading hours on August 31, Brent briefly climbed to about $90.60/bbl, with notable intraday gains. On balance, transit flows through the strait have approached a standstill, with no signs of recovery. If the standoff persists, global crude shipping costs will likely remain elevated and volatile, while oil prices will stay biased to the upside, given both actual supply disruption and persistent market anxiety.
Global energy and petrochemical markets are refocusing on shipping safety in the Strait of Hormuz and feedstock supply risks
For Asian petrochemical markets, the risks extend far beyond crude oil. The Middle East is an important supply base for Asia's LPG, naphtha, and C2 and C3 derivatives, and most crackers in Northeast and South Asia rely on imported naphtha and LPG. Rising crude directly lifts naphtha costs, while disrupted Middle East LPG shipments increase supply uncertainty for propane and butane. For producers using naphtha cracking to make ethylene and aromatics, if crude remains near $90 or climbs further, cost pressure will intensify again.
China's feedstock market rallied strongly, and polyurethane raw material costs strengthened
With supply continuing to tighten and export demand growing, China's aniline supply-demand fundamentals firmed, and market prices surged in a stepwise manner in August. Producers raised offers multiple times, while traders added premiums and held back sales. By the end of August, mainstream aniline prices in China had risen to about CNY 13,500/tonne, the highest level in nearly three years, with a cumulative gain of 16.2% for August. Besides aniline, major polyurethane raw materials such as benzene, toluene, propylene and ethylene oxide all opened higher at the start of the trading week on August 31. Moreover, driven by the escalating situation, rising concerns over the uncertain resumption of strait transits, and strong gains in upstream feedstock prices, polyurethane raw material prices have recently found stronger support and have broadly stopped declining and turned upward.