A surge in energy prices caused by the Iran war is rippling through global supply chains for common consumer goods, making materials like chemicals and plastics more expensive and pushing up manufacturing and transportation costs.

The European price of PET plastic used in soda bottles and other food packaging was 15.4% higher in mid-March than a year earlier, according to data from industry publication Plastics Information Europe (PIE). In North America polyethylene was about 29% higher year-on-year in March, according to estimates from Baird.

Most plastics are made from oil or natural gas processed into chemical building blocks and then converted into polymers which are used to make wrappings and tubs for products like detergents, as well as polyester fabric for clothing.

The U.S.-Israeli war on Iran that began on February 28 has caused the worst disruption to oil and gas supplies in modern history. Damage to infrastructure including Middle East oil refineries could take years to fix. 

For common grocery items, packaging of any type – plastic, paper or glass – typically represents 5% to 15% of a product’s manufacturing cost, according to specialised consultancy MAT.

Cost increases in your shopping basket

The average price of all groceries tracked by data firm NielsenIQ and sold in U.S. stores, from Walmart to CVS pharmacies, rose 2.9% from a year before in the four weeks from the start of the conflict to March 28. 

Here’s how some staples have been impacted.

“Plastic is at the core of this,” said Steve Zurek, vice president of NielsenIQ’s advanced analytics thought leadership team, referring to the price increases. “Especially in the home and personal care categories, because they’ve got lots of plastic bottles and tubes.”

The U.S. Consumer Price Index rose 0.9% in March, although that figure is not directly comparable to NielsenIQ’s data because the data firm and the U.S. Labor Department do not include exactly the same products or use the same methodology.

Economists told Reuters in April that March’s inflation U.S. reading captured only the initial impact of the oil price shock.

From China to the world

Second-round effects are expected as oil scarcity hits the petrochemical industry, particularly in Asia, the largest centre for plastic-making. 

Japan, South Korea, Singapore, India and China are among countries bracing for inflation to rise in the months ahead.

Refineries in China and across the region that turn crude oil derivatives like naphtha into chemicals for plastics had relied on the Middle East for almost two-thirds of supply. Oil scarcity is already forcing some to cancel contracts and cut production.

Prices for all standard thermoplastics in the Chinese market rose nearly 44% to a March peak from February, according to PIE. Chinese domestic prices for PET bottles were up 30% in the same period, while prices for high-density polyethylene blow moulding, used for laundry detergent bottles and other thick containers, were up 26.5%, PIE data shows.

China exports more plastic than any other country, selling over $141 billion worth of plastic and plastic-made items in 2024, according to UN Comtrade data. Its biggest export partner is the United States, which bought more than $78 billion of plastic and plastic articles in 2024, mostly from China, Canada, the European Union and Mexico, the data shows. 

In January and February, China exported $1.29 billion worth of plastic and plastic-made items to the United States, according to S&P Global data. Another $932 million worth went the European Union and over $5 billion elsewhere.

Peng Xin, general manager of Guangdong Rongsu New Materials Co., Ltd, said prices for the petrochemical feedstock from refineries that is used to make plastics “have been surging, up about 50% to 60%” since March.

His factory, which turns refinery products into compounded plastic pellets used in electric vehicle batteries, drone propellers and bicycle components typically holds up to two months of safety stock, Peng said. 

But a rush to buy before prices rise further has depleted inventories, meaning new orders were already being filled with raw materials bought at higher spot prices by the end of March. Those higher costs will need to be passed on to downstream customers, he said. 

Fears of further price increases have triggered stockpiling of plastics, clogging warehouses and roads in Zhangmutou, China’s largest plastics trading hub. Han Bing, who has managed a warehouse there since 2018, said daily throughput doubled to around 1,000 tonnes last month.

“At the peak, Zhangmutou was gridlocked for nearly a week. Traffic jams stretched for about 10 to 15 kilometres, and every warehouse was filled to capacity,” Han said.

At a factory across town, workers assemble mobile phone holders and charging cables destined for U.S. retailers, including Walmart. Walmart did not respond to a request for comment for this story.
The owner, who requested anonymity to speak freely about his business, said profit margins typically run at around 10% to 15%. With raw materials costs rising by about 15% in March, those margins have been wiped out, although he is reluctant to raise prices because he cannot afford to lose major retail customers.

Big U.S. and European packaged goods makers are more able to push back against major retailer requests to keep prices low.

Companies like Nestle, Unilever and Procter & Gamble sharply hiked prices during and after the COVID-19 pandemic to cover soaring supply chain and ingredients costs. These companies have continued to raise prices, and Nielsen IQ’s Zurek said they are likely to hike them further because of the Iran conflict.

“Even if the war stopped tomorrow, once prices rise it takes a long time for them to come down,” Zurek said.

Australian Dental Association, Center for International Environmental Law, MiT, NC State University, Tampax and Ingredients Matter

Lisa Jucca, Rebecca Pazos and Catherine Evans