Oil Price Volatility Spills Over into Chemical and Coatings Equities
The conflict in Iran has caused disruptions to oil shipments through the Strait of Hormuz, leading to increased crude prices and volatility. This ripple effect is not only affecting oil stocks but also companies that use petroleum-derived ingredients in their products.
A recent Bank of America note found that oil prices are now explaining a significant share of daily fluctuations in several chemical equities, with LyondellBasell Industries (LYB) experiencing a 40% correlation since the conflict intensified. This is not just Wall Street statistical mumbo jumbo; the U.S. Energy Information Administration reported that 20.9 million barrels a day of oil and petroleum liquids traveled through Hormuz in the first half of 2025, nearly 20% of global petroleum consumption.
The Strait of Hormuz disruption has significantly impacted oil flows, with average daily shipments falling to barely 4.9 million barrels per day in the second quarter of 2026, down from 21.6 million barrels per day in the fourth quarter of 2025. This has caused Brent crude prices to hit $105 a barrel on July 23.
The impact is not limited to oil stocks; companies that use petroleum-derived ingredients, such as paint producers Sherwin-Williams (SHW) and PPG Industries (PPG), are also experiencing increased volatility due to rising raw-material costs. However, US firms are more reliant on low-cost natural gas liquids as raw materials, which could shift the global cost curve in their favor.