In March 2026, a naval blockade in the Strait of Hormuz choked the flow of fossil fuels and petrochemicals to the world. Months on, the shock has not faded. We commissioned new research across our operating geographies of Europe, India and Indonesia to understand what it means for the industries we work to decarbonise and what leaders must do next.
The supply shock, in brief
The blockade stalled supplies of crude oil, liquefied natural gas (LNG) and the building blocks of modern industry: naphtha, ethylene, propylene and ammonia. Two sectors felt it particularly sharply. Fertilisers, which keep food on the table. And plastics, which are in almost everything we make.
Prices spiked and supplies tightened, and the effects are likely to continue for years rather than months.
But a disruption like this does more than cause short-term problems. It also shows us something about how these industries work, and the choice facing the governments that shape them.
What this issue means for decarbonisation goals
Much of the analysis of this blockade has focused on the damage: higher prices, tighter supplies and the strain on industries that were already under pressure. Our research asked a different question. What does this disruption mean for the shift to greener industry?
The blockade highlighted a vulnerability that already existed: these industries’ reliance on imported fossil feedstocks. The same dependency that drives their emissions is the one that leaves them exposed to supply constraints like this.
This changes the conversation. Decarbonising these industries is no longer only a climate goal. It is also a way to build resilience, strengthen energy security and improve industrial competitiveness.
So far, governments have responded in different ways. Some are using this moment to accelerate the transition, electrifying industry, investing in green ammonia and switching to lower-carbon feedstocks. Others are doubling down on fossil fuels in the name of security, risking a costly dependence on coal and gas that could last for decades.
Both pathways remain open. The decisions made over the next year will shape emissions from these sectors for generations, and the window for choosing well is closing.
Read our reports
- Europe: Prices rise despite low, direct reliance on the Gulf
Europe sources only a small share of its ammonia directly from the Gulf, but still felt a sharp rise in costs, because the price of globally traded gas accounts for 60 to 80 per cent of the cost of producing nitrogen fertiliser in Europe. This squeeze has reduced demand somewhat and made plastic recycling more commercially attractive. The bigger opportunity lies in EU plans that link energy security to electrification and green feedstocks. The risk is that the crisis becomes an argument for weakening carbon rules rather than strengthening them. Read the Europe report. - India: A crossroads between green hydrogen and coal
India’s 70 per cent dependency on imports meant it faced acute feedstock shortages just before the crucial monsoon sowing season. The government’s response moves in two directions at once: new incentives for green ammonia production sit alongside a sharp increase in funding for coal gasification, which risks locking the country into coal for decades to come and undermining its 2070 net-zero target. Read the India report. - Indonesia: Protected fertilisers, vulnerable plastics
Indonesia’s domestic gas supply protected its state-owned fertiliser producers, some of which profited from higher international prices. But the disruption showed how dependent the country’s private plastics sector is on imports, with at least one major producer declaring force majeure as domestic resin prices spiked. As a result, major companies are now treating decarbonisation as a way to improve both security and export competitiveness. Read the Indonesia report.
What we found across all three
Each region started from a different position, but a similar pattern emerges across all three. Where governments protect industries from every shock, there is little pressure to change. Where they treat the crisis as a reason to secure more fossil fuel supply, they risk locking in higher emissions for years to come. But where governments read the situation clearly, the same disruption becomes a reason to electrify, switch feedstocks and build industries that are both cleaner and more resilient.
The overall picture is mixed: this shock has made the case for decarbonisation stronger in some places, and weaker in others. Which way it goes will depend on the choices governments make over the next year.
What leaders must do now
Governments should avoid short-term measures that deepen fossil fuel dependence, and instead invest in electrification, green hydrogen, green ammonia and feedstock switching.
Where carbon pricing mechanisms are already in place, they should be maintained rather than weakened under pressure. And governments should use this moment to build circular, recycled and bio-based supply chains that reduce both emissions and the risk of future shocks.
Each report sets out what this looks like in practice. In Europe, it means holding the line on phasing out free emissions allowances during the 2026 ETS review, while extending carbon border measures to cover more of the chemicals sector. In India, it means redirecting some of the USD 3.9 billion earmarked for coal gasification towards green ammonia and green methanol programmes already underway. And in Indonesia, it means pairing a new national readiness lab for carbon border rules with a mandate to blend bio-based naphtha into plastics production.
Civil society also has a role to play: challenging responses that move in the wrong direction, holding governments to their existing commitments, and making the case that resilience and decarbonisation are part of the same goal. We’ve included region specific recommendations within each report.
Why we’re publishing this research
We focus our work where the need is greatest and the attention is often thinnest. Heavy-emitting industries account for around 40 per cent of global emissions, and that share continues to rise. Chemicals are a key part of this picture. We commissioned this research to help our community understand a fast-moving crisis clearly, and to use this moment to build support for change.
If you’re interested, learn more about our work building towards a sustainable chemicals sector or get in touch.
