The ongoing conflict between the United States and Iran, which escalated in late February 2026, has led to a blockade of the Strait of Hormuz. As a critical global transit choke pointโ€”handling 15% to 20% of global crude oil and Liquefied Natural Gas (LNG) consumptionโ€”this disruption has driven a continuous surge in global crude oil prices. Furthermore, the conflict shows no signs of a near-term resolution.

The Economic Intelligence Center of Siam Commercial Bank (SCB EIC) has assessed the impacts of this Middle East crisis on Thailandโ€™s rubber industry across five key dimensions: 1. Rising Oil Prices: While escalating oil prices mean higher operational costs for businesses, they simultaneously drive a positive shift toward natural rubber. As synthetic rubber prices rise in tandem with oil, the global market is projected to increasingly substitute synthetic rubber with natural rubber; 2. Surging Chemical Fertilizer Costs: Higher fertilizer prices are significantly impacting farmers' production costs. This creates an indirect ripple effect on processing factories; as farmers reduce fertilizer usage to cut costs, yields in the upcoming season may decline, potentially leading to a raw material supply crunch; 3. Middle Eastern Demand: Rubber exports to the Middle East account for only 3.2% of Thailand's total rubber exports. Consequently, the industry will experience a much less severe impact from shrinking regional demand. Any contraction in demand from this region will primarily stem from reduced consumer purchasing power and logistics bottlenecks that hinder optimal shipping; 4. Freight Rates and Logistics: The impact intensifies with shipping distance. Attacks on cargo vessels in conflict zones have forced shipping lines to divert from standard routes, increasing maritime uncertainty. Additionally, companies must bear higher war-risk insurance premiums. These escalating expenses will ultimately be passed down as higher freight rates and logistics costs for importers; and 5. Global Economic Slowdown: A cooling global economy inevitably dampens consumer purchasing power, negatively affecting agricultural commodities deeply tied to global marketsโ€”especially industrial raw materials. Rubber is highly sensitive to shifts in global GDP. If a severe global economic slowdown impacts the automotive industry, the demand for natural rubber could drop sharply.

Rubber operators are strongly advised to closely monitor the global economy and the automotive industry. Continuous monitoring will be vital for assessing risks and developing robust contingency plans to navigate the uncertainties of this global situation.

Mr. Veerasith Sinchareonkul

President

The Thai Rubber Association