From leading to bottom! High oil prices erode profit margins, American stock raw materials sector plunges 10% since the end of February.

As one of the strongest-performing sectors in the US stock market this year, the raw materials sector has become one of the sectors with the largest declines since the outbreak of the Middle East war, as rising oil prices have pushed up industrial production costs. Data shows that companies like PPG Industries, Inc. (PPG.US), Smurfit Westrock (SW.US), International Paper Company (IP.US), Vulcan Materials Company (VMC.US), have all seen their stock prices fall by at least 16% since February 27th, dragging down the S&P 500 raw materials index, which consists of 26 constituent stocks, by a cumulative 10% during this period. Following the Middle East conflict, only four of the constituent stocks in the index did not see declines. Prior to the conflict outbreak, only one of these stocks had declined since 2026. Record metal prices, strong fourth quarter earnings, and expectations of a rebound in chemical demand drove the rise of the raw materials sector in early 2026. The recent weakness in the sector is attributed to the disruption in the Strait of Hormuz, which has pushed oil prices up by as much as 50%, reaching nearly $110 per barrel, and oil is a key input for many raw materials companies. Michael ORourke, chief market strategist at independent brokerage firm Jones Trading, stated, "Rising oil prices will bring inflationary pressures or profit pressures to companies that use oil and oil products, even to construction and construction companies." Scott Helfstein, Global X Investment Strategy Director, stated that the rise in oil prices is also a reason for consumers and businesses cutting back on spending. He said, "Given that the rise in oil prices may curb consumer demand as well as corporate and company investment, investors are questioning whether demand for raw materials will remain strong." Raw material sector becomes the worst-performing sector in the S&P 500 index since the outbreak of the Middle East war Meanwhile, after last year's record rise, metal stocks also saw a decline during the Middle East conflict. After surging 168% in 2025, the stock price of gold miner Newmont Mining (NEM.US) has fallen by 18% since the war began. Metal and mining stocks normally perform well during periods of geopolitical conflict, but the previous sharp rise led to a pullback this time, and a stronger US dollar also puts pressure on metal prices. O'Rourke stated that precious metals "experienced a speculative price rally at the start of the year, weakening their safe-haven properties," "In that scenario, they trade more like risk assets." However, some stocks in the raw materials sector have seen gains during the Middle East conflict. Petrochemical and fertilizer companies, such as LyondellBasell (LYB.US), Dow, Inc. (DOW.US), and CF Industries Holdings, Inc. (CF.US), have risen by over 20% since the conflict began, as constrained supply from the Middle East is expected to drive demand and prices for North American producers. Despite the setback due to the impact of the war, investors have not completely exited the raw materials sector - the sector has still risen by about 6% so far in 2026. Although the price-earnings ratio of the raw materials index has fallen from its high at the start of the year, there has not been much change in earnings expectations for the next 12 months. O'Rourke stated, "The market is still looking ahead, expecting the US to have an advantage and expecting oil prices to fall. But the longer this situation persists, the more market confidence will be eroded."