Chemical manufacturing giant Dow announced Thursday that it anticipates supply chain disruptions stemming from Middle East conflicts will continue affecting operations until 2026, creating higher operational costs and potentially postponing planned industry growth projects.
The ongoing regional tensions are expected to maintain elevated oil and naphtha prices, which will increase the global cost structure for chemical producers, company officials stated during a quarterly earnings discussion.
Following the announcement, Dow’s stock price dropped approximately 3% during premarket trading sessions.
The chemical manufacturer indicated that the regional conflict may force companies to postpone or abandon planned facility expansions industrywide, as businesses reevaluate their investment strategies amid increased uncertainty and supply network interruptions.
Regional tensions have led to the shutdown of the Strait of Hormuz, creating bottlenecks in oil and petrochemical transportation routes. This has resulted in tighter global chemical availability and increased costs for plastics and polymer materials.
The constrained supply conditions are already influencing market pricing, enabling Dow to project second-quarter earnings and core profits that exceed Wall Street projections as elevated prices and limited supply availability improve profit margins.
“The margin backdrop began to positively inflect in March following global supply constraints, as impacts from the conflict in the Middle East quickly became widespread,” said CEO Jim Fitterling.
Industry experts note that North American chemical manufacturers maintain a competitive advantage due to abundant raw material access.
Earlier this year, Fitterling indicated that the rapidly changing supply conditions have begun to improve order volumes, with Dow implementing polyethylene price increases during March and April.
The company now projects second-quarter revenue of approximately $12 billion, surpassing analysts’ average projection of $11.3 billion according to LSEG data, and core earnings of roughly $2 billion compared to expectations of $1.6 billion.
Dow also stopped recording losses from Sadara Chemical, its partnership with Saudi Aramco, after liabilities reached existing commitments under accounting regulations. Sadara recently halted operations at its Jubail facility, citing supply chain interruptions from the Iran conflict.
For the quarter ending March 31, Dow reported an adjusted loss of 14 cents per share, performing better than analysts’ average estimate of a 29-cent loss per share.
