(March 19): One of the US stock market’s biggest winners this year has turned into the worst-hit sector since the start of the Iran War as a spike in oil prices has boosted industrial production costs.
Sealant maker PPG Industries Inc, packaging company Smurfit Westrock plc, paper producer International Paper Co and concrete producer Vulcan Materials Co are just a few names that have plunged at least 16% since the market close on Feb 27, dragging the 26-member S&P 500 Materials Index to a 10% decline in that period. All but four of its constituents are trading in the red post-conflict. Before the war, just one of those stocks was down for the year.
Record-high metal prices, strong fourth-quarter earnings and an expected uptick in demand for chemicals had propelled the sector earlier in 2026. The recent downturn stems from disruptions to the Strait of Hormuz, which has pushed the price of oil — a key input for many materials firms — up as much as 50% to almost US$110 a barrel.
“The rise in oil prices will create inflation pressure or margin pressure within companies that use oil, oil products or even if you’re building and doing construction,” Michael O’Rourke, chief market strategist at JonesTrading, said in an interview. “You’re going to get squeezed.”
Elevated crude prices are also a reason for consumers and businesses alike to cut back on spending, according to Scott Helfstein, head of investment strategy at Global X.
See also: Stocks and bonds drop as war spurs oil, Fed holds
“Investors are questioning whether or not demand for materials will be strong given higher oil prices that potentially dampen consumer demand and investment and corporate investment,” he said in an interview.
At the same time, metals stocks have also pulled back during the war after a record run last year. After soaring 168% in 2025, shares of gold miner Newmont Corp are down 18% since the start of the war. Metals and mining stocks have typically outperformed during geopolitical conflicts, but the recent run-up has led to a pullback this time around, and a stronger US dollar has also weighed on bullion.
Precious metals “went through a speculative phase to start the year and that nullified any type of haven quality,” O’Rourke said. “They were just trading like risk assets at that point.”
However, some stocks in the materials sector have surged during the war. Petrochemical and fertiliser firms like LyondellBasell Industries NV, Dow Inc and CF Industries Holdings Inc have gained more than 20% since it started as constrained supply from peers in the Middle East is expected to drive up demand and prices for North American producers.
See also: US stocks fall on escalating Iran war tensions, higher PPI
Even with the war-induced declines, investors aren’t fully turned off from the sector, which is still up about 6% for all of 2026. While the price-to-earnings ratio on the materials index has pulled back from highs earlier this year, the 12-month forward estimate hasn’t changed much.
“The market’s still looking through this, expecting the US to prevail and expecting oil prices to drop,” O’Rourke said. “But the longer it persists, market confidence will erode.”
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