KUALA LUMPUR (April 14): After a recent surge, petrochemicals from fertilisers to plastic resins are facing a reality check as analysts sound caution over further upside to current prices.

While product prices may stay elevated in the near term as truce in the Middle East still appears fragile, analysis suggests that the gains in fertilisers and methanol have likely accounted for the ongoing supply disruption, said RHB Research.

There is “limited further upside unless a more extreme pricing environment materialises,” the research house said.

The US have threatened to blockade the Strait of Hormuz after peace talks with Iran collapsed over the weekend, risking protracting a war now in its second month. The waterway is critical for global flow of petrochemicals such as urea exported by major producers Qatar and Saudi Arabia.

Prices of urea — mostly used as fertiliser in agriculture and as industrial resins — have jumped as much as 70% in some markets since the outbreak of the Iran war in March. So far this year, urea averaged about US$568 per tonne and is currently trading at around US$800 per tonne.

PETRONAS Chemicals Group Bhd (KL:PCHEM), which produces urea as well as other petrochemical products, is expected to capture margin expansion from high average selling prices and the impact on earnings will materialise beginning April, said Hong Leong Investment Bank.

However, the sustainability of the elevated prices beyond 2026 remains “uncertain, as we expect gradual normalisation in supply conditions alongside easing geopolitical disruptions,” the research house flagged.

Shares of PETRONAS Chemicals have nearly doubled since the launch of the US-Israel military campaign against Iran.

There are now nine ‘buy’, nine ‘hold’, and two ‘sell’ calls on PETRONAS Chemicals with the average target price of RM5.80, according to Bloomberg. The stock paused for the midday break at RM5.90, down 12 sen or nearly 2%, in Tuesday's trading session.