South Korea Turns to Russian Naphtha as Hormuz Blockade Bites

Iran's closure of the Strait of Hormuz in late February 2026 has had an unexpected impact on the semiconductor industry. While analysts debated the spike in oil prices and tanker movements, chipmakers in South Korea ran into an acute shortage of naphtha, a chemical feedstock without which no semiconductor fab can operate. Seoul's response was pragmatic and unexpected: Korea began shifting toward Russian suppliers.

Naphtha and chips: a hidden dependency

Most people do not connect naphtha with chipmaking, and they should. This petrochemical distillate is used to make ethylene, propylene and benzene. These in turn become polymers, solvents, photoresists and reagents used at practically every stage of semiconductor production, from applying the photomask to final chip packaging. Samsung, SK Hynix and other South Korean manufacturers together consume millions of tonnes of these petrochemicals every year, and a shortage is felt faster than a shortage of any "exotic" mineral.

Before the crisis, about two-thirds of the naphtha arriving in Asia passed through the Strait of Hormuz or was made from Middle Eastern crude. When the corridor was effectively blocked (a fifth of the world's oil and gas flows pass through it), Asian spot naphtha prices rose immediately, and scheduled deliveries to petrochemical plants were left in limbo. For South Korea, one of the world's largest naphtha consumers, it became an emergency.

The turn to Russian feedstock

Korean petrochemical companies, including Lotte Chemical, LG Chem and Hanwha TotalEnergies, began urgently reworking their supply chains. Russian naphtha, shipped through Far Eastern ports (Kozmino, Nakhodka) and partly along the Northern Sea Route, proved to be one of the few large sources able to close the gap quickly. The volume of spot-market deals with Russian suppliers jumped as early as March.

• Russia is among the world's top five naphtha exporters, and its volumes allow supplies to be ramped up quickly
• Far Eastern routes to Korea take 3–5 days, versus 2+ weeks from the Middle East
• The price discount on Russian naphtha persists, so the purchase also makes economic sense for Korea
• Talks are under way in parallel with suppliers in Kazakhstan and Azerbaijan
• Japan and Taiwan are studying similar diversification schemes, adding competing demand

The end of the just-in-time era

The Hormuz crisis exposed a systemic vulnerability the industry preferred not to discuss openly. For decades, the semiconductor industry was built on just-in-time: minimal raw-material inventories, finely tuned routes, minimized costs. That worked as long as global trade corridors stayed stable. One geopolitical force majeure, and the whole logic collapses within days.

Chipmakers are now forced to review strategic stockpiles not only of rare-earth metals and specialty gases, but also of basic petrochemicals. Insurance rates for ships in the Strait of Hormuz area have risen several-fold. Even if the blockade is lifted, carriers will return to familiar routes cautiously: the reputation of a safe corridor recovers slowly, and by then companies will already have signed long-term contracts with alternative suppliers.

"We are used to thinking that the bottleneck in chipmaking is a rare mineral or a single plant.

The Hormuz episode showed that the bottleneck can be simply a point on a map."

What it means

South Korea's switch to Russian naphtha is a pragmatic short-term fix, but a longer-term shift lies behind it: the semiconductor industry is moving from optimizing costs to optimizing supply-chain resilience. The vulnerability of these chains had long been a theoretical risk. The Hormuz crisis has turned it into a real operational problem that every fab in Asia will now have to solve.