The Iran war casts a shadow over BASF’s nascent revival 

When chief executives speak of a “transition year”, they are usually telling investors that a hard 12 months lie ahead. On February 27th, when he presented BASF’s annual results, Markus Kamieth said that for the German chemicals giant 2026 was “likely to be another year of transition, during which our industry must expect to face significant headwinds”. On a cheerier note, he expected the global market to be looking up by the end of the year, with better to come in 2027. That could only be good for BASF’s own recovery from a rough few years.

The next day America and Israel attacked Iran. Depending on how long it lasts, the war puts that recovery in doubt. When Mr Kamieth, 27 years at BASF and a former head of its Asian operations, succeeded Martin Brudermüller in April 2024, he inherited a firm reeling from another war, in Ukraine. As Germany’s biggest industrial consumer of Russian gas (its vast plant in Ludwigshafen, its home city, used to guzzle around 4% of Germany’s purchases), BASF was hard hit by the loss of those cheap supplies. It lost its crown as the world’s biggest chemicals company by revenue to a Chinese rival.

Mr Kamieth embarked on a thorough overhaul. He closed some of BASF’s operations in Ludwigshafen, as well as in Knapsack and Frankfurt. Last year he cut costs by €1.7bn ($2bn), €100m more than his initial target. This year he is aiming for another €2.3bn. In October he sold 60% of BASF’s coatings business for €7.7bn, over €1bn more than analysts had expected, to Carlyle, a private-equity firm. He plans to list its agricultural unit on the Frankfurt stock exchange next year. Thanks to Mr Kamieth’s slimming cure, BASF is looking healthier. It made a net profit of €560m in the fourth quarter of 2025, following a €786m loss a year earlier. BASF is also buying back €1.5bn-worth of shares. So far, says Sebastian Brey of Berenberg Bank, Mr Kamieth has shown sensible leadership in a difficult environment.

Investors seemed content: last year the share price started to recover. They also believed that European politicians would be more supportive of the chemicals industry and that the German government’s plans to spend loads on infrastructure would help employ unused capacity. Analysts even began to look more favourably on BASF’s $10bn investment in Zhanjiang, in southern China, which has not yet yielded a profit. China, too, has overcapacity in chemicals. But at some point that will moderate; and China will still account for around half of the world’s chemicals demand and the bulk of its growth, says Michael Schäfer of Oddo BHF, a Franco-German bank. Despite China’s importance, it brings in just 13% of BASF’s sales.

Now the Iran war casts a shadow over the industry and BASF’s nascent revival. “So far we have not been strongly affected by the war,” says Jens Fey, a company spokesman. True enough, the company has no production sites in the Gulf. The plant in Zhanjiang (BASF’s third-largest after Ludwigshafen and Antwerp, in Belgium) and its 28 others in China are operating as usual. BASF is producing “local for local”, so it is less affected than many other companies by disruptions of global trade. These days the company’s European sites get most of their gas from Norway.

But what if the conflict drags on? Some parts of BASF’s business will probably struggle with higher energy prices, points out James Hooper of Bernstein Research, although others could reap supernormal profits, because around one-quarter of the world’s supply of chemicals such as ethylene and ammonia are stuck behind the Strait of Hormuz, hurting BASF’s rivals. However, Mr Hooper says, “the main indirect effect of the war is demand destruction.” He forecasts that a month of war could decrease BASF’s guidance for EBITDA (earnings before interest, tax, depreciation and amortisation) this year by 3%, three months could shave off 10% and ten months 32%. BASF has indicated that EBITDA will lie between €6.2bn and €7bn.

All this means that 2026 could indeed be a difficult year, with more hope pinned on 2027. Europe’s chemicals industry is due for further consolidation, and BASF is still likely to be among the buyers rather than the bought. But much still depends on Mr Kamieth’s continuing turnaround plan and whether Zhanjiang can at last make a profit. The war in the Gulf, though, will make the job no easier. ■