Fitch Ratings has maintained its ‘deteriorating’ sector outlook for global chemicals for 2026, reflecting structural oversupply and demand destruction risks triggered by increasing production costs, despite temporary tightness due to disruption in the Strait of Hormuz.

The closure of the strait has led to significant chemical and fertiliser price increases, affecting supply and production costs. 

Disruption to shipments from the Persian Gulf has been amplified by production curtailments in Asia, due to the region’s dependence on feedstock from the Middle East. We expect the Strait of Hormuz to reopen in the near term, despite the recent re-escalation of hostilities.

These developments supported the margins of North American chemical producers in 2Q26 due to the region’s relatively stable feedstock costs. 

Most European producers have also experienced a positive effect, in the form of reduced competition. For example, Dow reported 2Q26 operating EBITDA up 230% from 2Q25, while BASF’s EBITDA before special items increased by 53% year on year.

In contrast, producers in APAC have seen existing, significant overcapacity compounded by feedstock shortages and reduced margins. In the Middle East, producers have been affected by shipment constraints and asset damage risks.