Middle East conflicts rewrite the logic of commodity pricing! U.S. petrochemical products and soybean oil are both facing a "price hike storm".

Last week, there was no sign of easing in the prices of US spot petrochemical products, with methanol prices soaring to their highest level in nearly four years. The core logic undoubtedly lies in buyers seeking alternative sources as the supply of key plastic raw materials from the Middle East continues to be disrupted. At the same time, the rise in crude oil costs caused by the Iran war continues to boost the global biofuel industry, driving up Chicago bean oil futures prices by 3.4% on Monday, reaching a new high in nearly three years. The Iran war and the continued risk of blockade in the Strait of Hormuz have undoubtedly significantly raised the "security premium" of global energy and chemical raw materials as a whole, and then respectively pushed up US petrochemical products and bean oil demand through the two paths of "disturbed petrochemical raw material supply" and "amplified biofuel demand by policies. The petrochemical chain is more of a typical supply shock - with disruptions in Middle East petrochemical and oil flows, global chemical supplies are tightening. Meanwhile, bean oil is more like a combination of demand shock and policy impact - rising oil prices improve the economics of making renewable diesel, and on March 27th, the US EPA finalized record renewable fuel standards for 2026 and 2027, further strengthening expectations for bean oil as a biofuel feedstock. The latest statistics show that US spot methanol prices climbed to about $1.27 per gallon on Friday, setting a new high since April 2022. Methanol, a chemical mainly used for fuel, plastics, and as a key raw material for olefin production, has seen recent price increases in petrochemical products, reflecting extreme tightness in the global chemical market due to the blockade of shipments through the Strait of Hormuz. Iran has long played an important role in supplying methanol to the Asian market. According to the latest statistics from data company Oil Price Information Service, an estimated 50% of China's methanol imports come from Iran. Since the outbreak of the Iran war at the end of February, the continuous and escalating geopolitical conflicts have heightened concerns about the continuous near-zero flow of commodities through the Strait of Hormuz, which has continued to increase global chemical prices and support US methanol production capacity and trading prices. In the broader global petrochemical product system, prices remain near historic highs, significantly boosting exports of important US petrochemical products. US spot ethylene - the basic raw material for the production of polyethylene products such as plastic bags - is maintained at nearly 31 cents per pound, the highest level since February 2025. Meanwhile, polypropylene of polymer grade (PGP), essential for making plastic food containers and medicine bottles, has risen to 55.5 cents, reaching its strongest level since August 2024. Butadiene, a key raw material for synthetic rubber and tires, has risen to 61 cents per pound, the highest level since May 2024. The higher operating rates in the US are being driven by cheaper ethane supplies. Ethane is a raw material for ethylene production, and its cost reduction has increased ethylene production, providing important support for PGP prices. Despite potential risks to exports such as logistics constraints including rising freight costs and delayed shipping times, demand for contract fulfillment and continuous global demand pulling supplies to overseas markets, US producers are expected to maintain high operating rates. Biofuels continue to receive significant tailwinds, with bean oil prices soaring As the Iran war has driven up crude oil costs and continues to boost demand in the biofuel industry, Chicago bean oil futures prices surged 3.4% during Monday's futures trading session in Eastern time. With the Strait of Hormuz still under blockade by the Iranian military, and US President Donald Trump threatening to continue targeting Iranian energy assets, along with the continued rise in oil prices since the end of February, the price of this bean oil used for producing renewable diesel and food products such as salad dressing is approaching new three-year highs. Before this significant increase in bean oil futures prices, the White House last Friday announced long-awaited biofuel blending standards, increasing the requirements for the use of crop-based fuels. Analyst Susan Stroud from No Bull Ag said that these mandatory requirements "will substantially increase the demand for biomass diesel in 2026, supporting strong demand for core raw materials, especially strong demand for bean oil." After the Iran war raised crude oil and diesel prices, the economic viability of renewable diesel and biofuel relative to traditional diesel improved, prompting the market to raise expectations for biofuel feedstocks; since bean oil plays a crucial role in the US biofuel system, institutional funds are likely to directly buy bean oil futures, anticipating stronger industrial demand in the future. Crude oil prices determine the approximate cost center of traditional diesel and transportation fuels, and biofuels are "alternative energy molecules" integrated or blended into these petroleum fuel systems, with bean oil being an upstream raw material for a significant portion of biofuels and renewable diesel production. The US Energy Information Administration clearly states that vegetable oils, particularly bean oil, are the main feedstock for US biodiesel production; renewable diesel can also be produced using similar biomass raw materials as biodiesel. USDA data shows that bean oil accounts for over 40% of all the raw materials used in US biodiesel production, and the quantity of bean oil used in this sector has increased significantly from 5 billion pounds in the 2014/15 season to 12.5 billion pounds in the 2022/23 season. In other words, the higher the oil price and the more policy encourages blending, the more the market will see bean oil as an "energy asset" rather than just a "Shenzhen Agricultural Power Group". As shown above, investors hold the largest net long position in bean oil since 2016 - higher oil prices and stronger biofuel demand further fueling bullish sentiment. Bean oil for May delivery rose to 69.68 cents per pound, slightly below the high reached on March 9, which was the highest level since the end of 2022. According to regulatory statistics, investors' bullish sentiment on bean oil has risen to the highest level in nearly ten years. The price of palm oil has also risen significantly after Indonesian President Joko Widodo announced plans for the global largest palm oil producing country to develop biofuels. With increased demand for biofuels and rising fertilizer costs due to the war, US farmers are likely to increase soybean plantings this spring, while reducing corn plantings accordingly. Wall Street analysts surveyed by Bloomberg expect the US Department of Agriculture to show in the annual planting intentions report scheduled for release on Tuesday that soybean plantings will increase while corn plantings may decrease. Analysts also expect the USDA to show increased soybean, corn, and wheat stocks compared to a year ago. Middle East conflicts ignite a chain reaction of price increases in the chemical industry Methanol, ethylene, PGP, and butadiene all experienced price increases, not just due to "war-themed speculation" but because the prices of the global chemical supply chain are recalculating the real costs of the Middle East supply disruption. Statistics show that about $200-$250 billion worth of petrochemical products are transported through the Strait of Hormuz each year, and by 2025, the Middle East accounts for over 40% of global polyethylene exports; meanwhile, the risk of the strait closing could disrupt approximately 1.2 million barrels per day of global naphtha exports, causing profits from Asian naphtha cracking to soar from about $108 per ton before the war to over $400. Therefore, the most direct result of the new round of Middle East geopolitical conflicts for the global chemical chain is this: the high dependence on Middle East supplies and naphtha routes is dramatically increasing the costs of Asia and Europe, while the US chemical system, relying on natural gas and ethane, is relatively benefiting. They are receiving stronger export orders and higher profit margins. In other words, the core reason for the rise in US petrochemical prices is not just that "global prices are rising", but that after the marginal supply disruptions globally, the US has become a scarcer alternative supply. However, the reason why prices of both chemicals and bean oil have been rising simultaneously is because the Iran war has activated the three variables of "energy cost - raw material substitution - trade flow reconstruction" at the same time and thoroughly. For the chemical chain, the market is chasing for safer and lower-cost US molecules; for the agricultural chain, the market is chasing for plant oil molecules with more policy protection and the ability to take advantage of high oil prices. It highlights that during times of geopolitical conflict, whoever can provide more stable chemical raw materials and fulfill more certain fuel replacement demands will have a higher pricing power. The logic behind the rise in bean oil futures prices is slightly different from petrochemical products; it is not directly "affected by the Middle East", but rather jointly "appreciated" by higher oil prices and stronger policy demand. After the Iran war pushed up crude oil and diesel prices, the economic feasibility of blending renewable diesel and biofuel improved; at the same time, the US EPA set the total renewable fuel obligations for 2026 and 2027 at 26.81 billion and 27.02 billion RINs respectively, with the total applicable volume of biomass diesel reaching 9.07 billion and 9.20 billion RINs. The EPA also explicitly stated that to achieve these levels, the production and use of biomass diesel and renewable diesel should increase by over 60% from 2025, thus boosting US soy-related demand. This means that the rise in bean oil is not simply following the "emotional linkage" of oil prices, but is driven by the revision of institutional demand curves.