The Strait of Hormuz remains one of the world's most critical trade routes for petrochemical exports. As concerns emerged regarding the movement of raw materials through the region, buyers were forced to evaluate supply risks beyond traditional pricing considerations.

The conflict demonstrated that recycled resin could provide a degree of supply diversification when virgin polymer markets face logistical disruptions. While recycled plastics cannot replace global virgin production, they can reduce dependence on international supply chains and provide an alternative source of material during periods of uncertainty.

This shift was particularly important because it moved the discussion surrounding recycling beyond sustainability objectives. Recycling increasingly became part of a broader conversation about supply resilience, procurement strategy and risk management.

Virgin and recycled market connections

As petrochemical supply challenges heightened and virgin prices increased, the price premium between virgin and recycled materials narrowed significantly.

This improved the relative competitiveness of recycled resins. In some regions, buyers increased consumption of recycled material as economics became more favorable. In the U.S., however, substitution remained limited as broader economic uncertainty continued to weigh on procurement strategies.

Traditionally, recycled markets are often driven primarily by local supply and demand fundamentals such as feedstock availability, collection rates and domestic consumption. During the conflict, external factors including virgin prices, freight rates and international resin pricing became increasingly influential.

Logistics as a price driver

Disruptions in global shipping and elevated freight rates increased the cost of moving both virgin and recycled materials across regions. These changes affected import replacement values and altered trade economics throughout the plastics supply chain.

The impact was particularly evident in the US rPET market. When comparing ICIS data of domestic production of rPET and US International Trade Commission data, about 30 percent of U.S. rPET output is derived from imported material. During the first half of 2026, domestic end market demand for rPET remained relatively flat, and PET bale markets continued to show signs of oversupply, particularly on the East Coast after roughly 30 percent of domestic wash line capacity shut down between 2025 and early 2026.

Historically, these factors would have placed downward pressure on downstream rPET pricing. Instead, during the early 2026 conflict period, flake and pellet prices strengthened due to heightened freight costs and competition with imported materials. The conflict reinforced how reliant some recycled markets remain on international trade flows, particularly in segments where domestic production and quality are insufficient to meet demand.

In the U.S. recycled plastics market, prices increased despite limited improvements in underlying demand. Recyclers had to account for monitoring oil prices, geopolitical developments and freight markets alongside traditional indicators such as collection volumes and underlying demand.

Regional impacts varied

The differing regional responses demonstrate that recycled plastics markets remain heavily influenced by local infrastructure. Global events may trigger broad market reactions, but their ultimate impact depends on the structural characteristics of individual regions.

Europe and Asia experienced greater exposure to supply disruptions due to their stronger dependence on Middle Eastern petrochemical exports. Some market participants in these regions increased recycled resin consumption as virgin materials became more expensive or less readily available.

The U.S. market experienced a more moderate impact from the conflict. Although higher virgin resin prices narrowed the spread with recycled materials, demand remained largely unchanged as converters continued to prioritize material consistency, product performance and supply reliability over price alone. This was particularly evident in higher-specification applications, where quality requirements limited the ability to increase recycled content.

Structural constraints within the U.S. recycling system also played a role. Collection, sorting and processing challenges continue to limit the availability of high-quality recycled resin, leaving several markets reliant on imported material. While imported recycled resins often offer greater consistency and lower contamination levels than domestic alternatives, elevated freight costs reduced their competitiveness during the conflict. As a result, improved recycled resin economics supported pricing and margins for recyclers, but did not translate into a meaningful increase in consumption.

Impacts of a potential resolution

As attention shifts from disruption to potential normalization, the key question becomes how markets respond when the conflict is resolved.

The most immediate impact would likely be lower virgin resin costs. Improved shipping conditions, reduced geopolitical risk premiums and greater availability of Middle Eastern polymer exports would place downward pressure on virgin resin pricing. As virgin prices soften, the narrowed price gap between virgin and recycled materials could begin to widen again.

While recycled resin prices may soften in the second half of the year, market participants do not expect a return to pre-conflict lows.

Historically, lower virgin resin prices can reduce incentives for buyers to maximize recycled content, particularly in cost-sensitive applications. Polyolefins such as recycled polyethylene (rPE) and recycled polypropylene (rPP) may be especially exposed because their demand often remains price sensitive. In contrast, rPET may prove more resilient due to regulatory requirements and established brand-owner commitments supporting recycled content usage, particularly in the packaging sector.

Conclusion

The Iran conflict and Strait of Hormuz disruptions highlighted the extent to which recycled plastics markets are influenced by broader petrochemical and trade dynamics. While higher virgin resin prices improved the competitiveness of recycled materials, the primary impact was a shift in pricing behavior, supply-chain strategies and perceptions of risk. Recycled plastics demonstrated their value as a regional source of supply-chain diversification during periods of broader market disruption.

As the market moves into the second half of 2026, attention is shifting from geopolitical uncertainty to normalization. Lower virgin resin costs and improving logistics could pressure recycled pricing, while trade policy and ongoing implementation of policy regulations will remain key market drivers.