As ongoing tensions in the Middle East continue to disrupt oil markets and global shipping routes, another strategic vulnerability is emerging for Asia and the Pacific – the region’s heavy dependence on petrochemical feedstocks that underpin linear plastics production systems.
In its Asian Development Outlook April 2026, ADB warned that escalating geopolitical tensions and trade disruptions are increasing risks to growth, inflation, and supply chain stability across the region, particularly for highly trade- and import-dependent economies. With persistent energy supply disruptions and prolonged market tightness, the report also projected growth to slow to 4.7% and inflation to rise to 5.2% in 2026, demonstrating how geopolitical instability and fossil fuel dependence impact trade, manufacturing, transport, and plastics supply chains.
The Strait of Hormuz serves as a critical corridor not only for oil, but also for chemical inputs used in plastics manufacturing, exposing the broader fragility of fossil fuel-dependent supply chains and reinforcing the need for more resilient and circular approaches to material production and resource use. This highlights the urgency for accelerating the transition to circularity beyond reduce, reuse, and recycle. Improving material efficiency, enhancing secondary raw materials markets, and reducing dependence on virgin fossil fuel-based inputs will be critical for not only environmental sustainability but also for economic resilience and supply chain security across the region.
Impacts on plastics and manufacturing
According to the International Energy Agency, nearly 25% of the world’s seaborne oil and gas passes through the Strait of Hormuz, and of that, the 80% of the region’s polyethylene exports are sent to major economies in Asia and the Pacific such as the People’s Republic of China, Japan, India, the Republic of Korea, and others in Southeast Asia, making them deeply integrated into global petrochemical and plastics value chains. The region is highly exposed and vulnerable to the conflict in the Middle East, and as the world’s largest manufacturing hub and one of the largest consumers of plastics and petrochemical outputs, the impacts are severe.
Petrochemical producers and manufacturers across the region are experiencing higher input and transportation costs, tighter supply conditions, and growing uncertainty in global markets. In particular, the price for naphtha, a key feedstock used in plastics production of polyethylene and polypropylene, has risen sharply due to the conflicts and as a result, plastic manufacturers in Japan have also announced price hikes to pass on the naphtha supply costs, impacting a wide range of sectors from food and beverage and retail to semiconductors, textiles and apparel, among others. For economies that are heavily reliant on export manufacturing, these disruptions could weaken industrial competitiveness and place additional inflationary pressure on businesses and consumers already coping with elevated global uncertainty.
The case for circularity
Accelerating the transition to a circular economy addresses the growing challenges associated with dependence on imported fossil fuel-based inputs and long global plastics supply chains, which are exacerbated during crises such as the conflict in the Middle East. Geopolitical tensions and disruptions to critical shipping routes such as the Strait of Hormuz can have immediate adverse impacts on petrochemical, manufacturing, packaging, and consumer goods markets across the globe, particularly in Asia and the Pacific.
In this context, instead of relying on imported virgin fossil fuel-based inputs, adopting circular economy practices would allow economies to recover, reuse, and recirculate materials domestically through recycling, remanufacturing, and secondary raw materials markets. By 2060, global plastics use is project to nearly triple from 2019 levels, largely driven by economic and population growth. Therefore, for Asia and the Pacific, expanding domestic material recovery and recycling systems could help reduce exposure to commodity price volatility, shipping disruptions, and external supply shocks while supporting more resilient and resource-efficient industrial development.
Policy priorities for the region
To accelerate the transition toward circularity, policymakers should adopt a multi-sector approach that addresses infrastructure, economic incentives, regulatory frameworks, and market conditions needed to support more resource-efficient and resilient systems across industries. Some key priorities include:
- Expanding extended-producer responsibility (EPR) systems, shifting the responsibility for waste collection, recycling, treatment, and product design onto producers instead of consumers.
- Investing in waste collection, sorting, recycling, and resource recovery infrastructure.
- Creating economic incentives to promote circular practices, e.g. taxes and fees, subsidies, and deposit-refund schemes.
- Promoting secondary materials markets and circular business models, making them competitive with traditional linear, fossil fuel intensive production systems.
- Strengthening regional and international cooperation, including through the Global Plastics Treaty negotiations, to harmonize plastics standards, support circular trade systems, and address transboundary marine plastic pollution.
The conflict in the Middle East serves as a reminder that circular economy cannot be seen as just an environmental agenda, but rather as a strategic imperative for strengthening economic resilience, resource security, and supply chain stability across Asia and the Pacific.
