When US and Israeli strikes hit Iran on 28 February 2026, few commodity analysts expected the Methanol Market to become one of the clearest casualties. Yet six months later, methanol has emerged as one of the sharpest single-product stories of the conflict, with the impact particularly pronounced in India, the world's largest importer of the fuel and feedstock chemical.
Why Methanol, and Why Iran
Iran is not simply another supplier in the Methanol Market; it is a structural pillar of global supply. The country holds roughly 11% of global methanol nameplate capacity, making it the world's second-largest producer after China, and exports the overwhelming majority of its output.
For years, Indian buyers relied heavily on Iranian cargoes for a straightforward reason: cost. Iran's gas-based methanol was inexpensive to produce, while sanctions kept Western buyers away. This combination allowed Indian importers to negotiate highly favourable terms. With a short four-to-six-day sailing time from ports such as Bandar Khomeini to India's west coast, Iran became the default anchor for Indian methanol pricing.
That anchor came loose almost overnight when the conflict began.
Figure: Imports and price fluctuations of methanol India market 2024 till Q2 2026
Source: Secondary Research, Primary and Prismane analysis
A Conflict That Wouldn't Stay Contained
The war has developed in fits and starts rather than along a straight path. Strikes in late February were followed by an Iranian move to assert control over the Strait of Hormuz, a corridor that normally carries about a quarter of the world's seaborne oil trade and a fifth of its LNG.
A first ceasefire in April collapsed within weeks. A June memorandum intended to formally end hostilities lasted barely a month before Iran resumed strikes on commercial vessels it considered to be violating its new transit rules. As of this writing, the Strait of Hormuz crisis remains officially unresolved, while shipping traffic through the corridor continues to operate well below pre-conflict levels.
For the Methanol Market, each of these flashpoints triggered a similar response: force majeure declarations, a scramble for non-Iranian cargoes, and another increase in spot prices.
What It Did to Prices and Supply
The numbers illustrate the impact clearly. During the early weeks of the conflict, Middle East methanol prices increased by roughly 7% in a single week as reports of restrictions in the Strait spread.
In India, spot prices rose from around ₹28.65/kg in January to approximately ₹35–40/kg by the spring, representing an increase of nearly 40%. Buyers that had structured their procurement around Iranian barrels suddenly had to compete for a much smaller pool of non-sanctioned and non-conflict-exposed supply.
The impact on supply was structural rather than simply a temporary price spike. Iran had been exporting 9–10 million tonnes of methanol annually, with the vast majority going to India and China.
Indian customs data indicates that Iran's share of India's methanol import basket declined from roughly half of volumes in the years before the conflict to a low single-digit percentage by early 2026. This occurred as US sanctions enforcement intensified and Indian buyers became increasingly cautious about handling flagged cargoes.
India's Scramble to Diversify
What distinguishes India's response from China's is the speed and direction of its sourcing shift. While Chinese buyers have, in some instances, continued to absorb discounted Iranian cargoes despite the associated risks, Indian importers moved rapidly to rebuild their supplier base around non-Iranian origins:
- Oman, Saudi Arabia and Qatar absorbed the largest share of reshuffled volumes, benefiting from similar shipping economics within the Gulf.
- Russia returned as a source of Indian cargoes after an approximately two-year absence, with meaningful volumes arriving by December 2025 and continuing into 2026.
- Japan supplied first-time cargoes to India, a sourcing pattern that would have been uneconomical before the conflict changed freight and price arbitrage.
- China and Malaysia emerged as opportunistic spot suppliers, with Malaysia in particular recording a dramatic, although low-base, increase in export value to India.
India's overall methanol imports still increased in volume terms during the disruption, rising by more than 13% year-on-year. This indicates that downstream demand from formaldehyde, acetic acid and pharmaceutical producers remained firm even as the sourcing structure of the Methanol Market was being reshaped.
The Outlook From Here
Three factors will determine the direction of Indian methanol pricing:
- Strait of Hormuz stability. Every ceasefire this year has proven fragile. Until transit through the Strait normalises on a sustained basis, freight risk premiums are likely to remain embedded in landed costs.
- The durability of India's diversification. Some of the new flows, including Russian cargoes and Japanese spot volumes, were opportunistic responses to the crisis rather than long-term contracted relationships. Whether these flows continue once, if, Iranian supply becomes available again will influence the market's underlying cost structure for years.
- Domestic capacity. The crisis has renewed discussions around India's domestic methanol production and green and blue methanol capacity additions, as buyers and policymakers look for ways to reduce exposure to a supply base concentrated in one of the world's most volatile shipping corridors.
For now, Indian methanol buyers are paying the price of a supply chain that was optimised for cost rather than resilience. Whether that lesson remains once the geopolitical uncertainty settles will be one of the key structural questions facing the Indian petrochemical sector and the Methanol Market over the next few years.