Japan's Naphtha Shock: Paint Thinner Prices Double as Renewed Iran Conflict Threatens Fresh Shortages

Japan is grappling with a sustained naphtha shock that has driven up the cost of paint, thinner and other petroleum-derived materials, squeezing small contractors across the country. The disruption traces back to the closure of the Strait of Hormuz after the Iran war erupted on February 28, 2026. Because Japan sources the large majority of its crude oil and a substantial share of its naphtha from the Middle East, the loss of that shipping route quickly rippled through the petrochemical supply chain that feeds coatings, plastics and countless everyday products.

Naphtha is refined from crude oil and broken down into basic chemicals such as ethylene, propylene and aromatics. These form the backbone of the solvents and resins used in paint and thinner. When naphtha flows tightened in early spring, prices surged and supplies grew scarce almost overnight.

The impact on the painting and construction trades was severe. By April, an industry survey found that only a small fraction of member firms could obtain thinner under normal conditions, and the national painting contractors association warned that the shortage threatened the survival of many businesses. Home improvement stores ran out of stock, exterior renovation projects stalled, and manufacturers issued repeated price-increase notices.

Marutake Tosou, a painting company in Nagoya illustrates how the crisis unfolded on the ground. The firm, based in the city's Nishi Ward and in business for roughly half a century, saw its thinner deliveries shrink from the end of March. Through late May, its executives were calling wholesalers daily, unsure whether remaining stock would last through June. Since June, the company has gradually been able to secure the quantities it needs again, provided orders stay within certain limits.

Supply conditions have eased, but prices remain the bigger problem. A 16-liter can of thinner that cost about 4,600 yen until March now sells for around 9,500 yen, more than double. Some paints have climbed by more than 20,000 yen over recent months, and insulation materials have risen by roughly 40 percent. Because painting fees are typically fixed by prime contractors such as housebuilders, subcontractors cannot easily pass these costs on, leaving small operators to absorb the burden.

Not every product has recovered. Plastic PP bands used to fasten and package goods remain hard to obtain, forcing some firms to switch to thinner alternatives once existing stock runs out. The shortage has also touched adhesives, waterproof sheets, packaging film and printing ink, prompting well-known responses such as a major snack maker switching to monochrome packaging.

The Japanese government has taken several steps to stabilize the market. On June 23, it launched a system allowing paint and thinner to be sold directly from manufacturers to construction firms, bypassing bottlenecks in the usual distribution chain. Buyers have also tapped alternative supplies from outside the Middle East, including additional crude from the United States, while released strategic stockpiles helped bridge the gap during the worst of the shortage. Officials have repeatedly insisted that national inventories are sufficient, even as businesses reported difficulty obtaining materials on the ground.

A short-lived diplomatic breakthrough offered some relief. On June 17, the United States and Iran signed a memorandum of understanding aimed at ending the war and reopening the Strait of Hormuz, and crude oil prices fell back toward the low 70-dollar range per barrel. That easing now looks fragile. In early July the ceasefire broke down as fresh strikes were exchanged, reviving fears that Japan could slide back toward the acute shortages seen in the spring.

For now the situation remains unresolved. Supply has largely normalized for many materials, but elevated prices continue to strain small painting and construction businesses, and the renewed conflict in the Middle East leaves the outlook uncertain.