--- title: "Why has the chemical industry adjusted recently, and what is the outlook for the future?" type: "News" locale: "en" url: "https://longbridge.com/en/news/280548222.md" description: "Recently, the chemical sector has experienced a significant pullback due to escalating conflicts in the Middle East and rising oil prices. Since mid-February, the petrochemical industry index has risen in tandem with oil prices, but as Brent crude oil prices surpassed $100 per barrel, the chemical sector began to fluctuate and decline. Concerns about a potential economic recession caused by high oil prices, profit-taking, and the long-term implications of sustained high oil prices have prompted investors to seek safety, leading to adjustments in the chemical industry. Looking ahead, investors need to pay attention to oil price trends and their impact on the chemical sector" datetime: "2026-03-26T01:19:18.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/280548222.md) - [en](https://longbridge.com/en/news/280548222.md) - [zh-HK](https://longbridge.com/zh-HK/news/280548222.md) --- # Why has the chemical industry adjusted recently, and what is the outlook for the future? Recently, the chemical sector has experienced significant pullbacks. A review of the recent trends in the chemical sector alongside oil prices reveals the following observations for attentive investors: Since mid-February, the petrochemical industry index (referring to the CSI Petrochemical Industry Index (H11057.CSI), hereinafter the same) has risen moderately alongside oil prices, showing decent performance. At this time, the Brent crude oil price was approximately $70 per barrel. As geopolitical conflicts in the Middle East escalated sharply, oil prices began to rise rapidly. On March 2, Brent crude oil prices broke through $80 per barrel, and the chemical sector subsequently entered a period of volatility. After the price of Brent crude oil surpassed the $100 per barrel mark on March 12, the chemical sector experienced a noticeable trend reversal. **So why has the chemical industry seen a significant pullback recently? What is its relationship with oil prices? Looking ahead, how should we view the chemical industry market? Is it still worth investing? Today, we will provide a detailed interpretation.** Figure: Trends of oil prices and the chemical index since the outbreak of the Middle East conflict Data source: Wind, as of March 24, 2026 **1\. Why has the chemical sector adjusted recently? Mainly due to risk aversion in the stock market.** Recently, there has been **a significant marginal change in the market— the Middle East conflict has intensified, and its duration may be longer than originally expected, leading to an upward adjustment of the expected oil price center to $100 per barrel.** The delay in the resolution of risk events has caused a rapid contraction in market risk appetite, prompting stock market funds to seek refuge. Specifically, the stock market is avoiding three risks: **(1) Avoiding the risk of "global economic recession": Concern that high oil prices will damage demand.** The market is worried that persistently high oil prices will elevate inflation expectations, thereby affecting the pace of interest rate cuts, forcing tightening to last longer, ultimately suppressing total demand and potentially leading to a recession. **(2) Avoiding the risk of "profit-taking": Due to previous gains in the chemical sector, funds choose to lock in profits first.** The chemical sector has seen certain gains since the second half of 2025. After the geopolitical conflict amplified uncertainty, some profitable funds tend to lock in gains, leading to a "rise quickly, fall quickly" adjustment due to this chip structure combined with sentiment. **(3) Avoiding the risk of "long-term high oil prices": Concern that downstream cannot bear it, leading to price transmission issues.** If oil prices remain above $100 per barrel for an extended period, some downstream product companies aimed at end consumers may find it difficult to pass on costs in the context of slow demand recovery, potentially choosing to delay purchases or directly procure low-priced inventory, causing the price transmission chain of chemical products to be blocked. Chemical companies may have to absorb the profit losses caused by rising oil costs. **2\. Reverse thinking: What "real benefits" have been mistakenly punished by pessimistic sentiment?** When sentiment is overly pessimistic, it often marks the starting point for reverse thinking. **In fact, the current situation is not only not a negative for some chemical companies but may actually be a positive, such as coal chemical companies.** The U.S.-Iran conflict has driven up crude oil prices, leading to a significant increase in the product costs of oil chemical companies, which in turn drives up the overall prices of chemical products In contrast, domestic coal prices remain relatively stable, leading to a situation where coal chemical companies can use relatively cheaper coal to sell high-priced chemical products (such as olefins, methanol, etc.) that rise with oil prices, significantly increasing profits, yet they have been mistakenly punished by recent risk aversion sentiment. **Looking ahead, when downstream companies exhaust their inventories and realize that oil prices are still high, they will abandon the idea of "waiting for a drop to buy" and begin concentrated procurement to replenish stocks (i.e., the inventory replenishment cycle).** At that time, chemical companies will not only be free from the burden of high costs dragging down profits but will also be able to leverage the situation to further increase product profit margins. **Three, extending the perspective, how to view the future of the chemical industry?** If we set aside the noise of geopolitical conflicts, the chemical sector remains a core direction with considerable investment value. There are two major long-term trends supporting this: **Overseas competitors are being accelerated out of the market, and Chinese chemicals are expected to see market share expansion.** The impact of this energy crisis on the global chemical landscape is profound and irreversible. Regions like Europe, Japan, and South Korea, which heavily rely on Middle Eastern oil and gas, are facing tremendous cost pressures. Taking Europe as an example, high energy costs combined with strict carbon taxes are leading to accelerated shutdowns of its chemical capacities (such as polyurethane). The downfall of competitors presents opportunities for Chinese companies. With a complete industrial chain, stable energy costs, and economies of scale, leading Chinese chemical firms are entering a golden window period to rapidly capture global market share. **The "dual carbon policy" restricts supply expansion, and the profit center of the chemical industry is expected to systematically improve.** 2026 marks the starting point for the comprehensive implementation of carbon emission dual control under the 14th Five-Year Plan. Carbon emissions will become a rigid indicator for local governments, meaning that the approval of new high-energy-consuming chemical projects will be extremely difficult. The cyclical "boom and bust" in the chemical industry often occurs when the industry is prosperous, leading to massive capacity expansions by companies, resulting in oversupply. However, due to the "dual carbon policy," new capacity in the chemical industry will become exceptionally difficult, which is expected to systematically elevate the profit center of the chemical industry in the long run. In summary, the recent adjustments in the chemical sector are more about emotional risk aversion under reduced risk appetite. When long-term oil prices retreat from extreme highs, the explosion of replenishment demand under reasonably high oil prices, combined with the exit of overseas capacities and domestic policy restrictions on supply expansion, may actually solidify the logic of the chemical sector. For investors who wish to grasp the trends of **global market share increase + domestic supply rigidity** in the chemical industry but find it difficult to conduct in-depth research on individual stocks, they can pay attention to the CSI Petrochemical Industry Index (H11057.CSI). This index packages leading chemical companies such as Wanhua Chemical and Hualu Hengsheng, with over 92% of its holdings in basic chemicals + petroleum refining. The largest ETF product linked to this index is the **Chemical Industry ETF E Fund (516570, linked fund A/C: 020104/020105)**, with the latest scale of 2.27 billion yuan (as of March 23, 2026), making it a quality tool for positioning in the chemical market ### Related Stocks - [600938.CN](https://longbridge.com/en/quote/600938.CN.md) - [563150.CN](https://longbridge.com/en/quote/563150.CN.md) - [159309.CN](https://longbridge.com/en/quote/159309.CN.md) - [561360.CN](https://longbridge.com/en/quote/561360.CN.md) - [IXC.US](https://longbridge.com/en/quote/IXC.US.md) - [159870.CN](https://longbridge.com/en/quote/159870.CN.md) - [603353.CN](https://longbridge.com/en/quote/603353.CN.md) - [00857.HK](https://longbridge.com/en/quote/00857.HK.md) - [159697.CN](https://longbridge.com/en/quote/159697.CN.md) - [516220.CN](https://longbridge.com/en/quote/516220.CN.md) - [561760.CN](https://longbridge.com/en/quote/561760.CN.md) - [516020.CN](https://longbridge.com/en/quote/516020.CN.md) - [XOP.US](https://longbridge.com/en/quote/XOP.US.md) - [159731.CN](https://longbridge.com/en/quote/159731.CN.md) - [OIH.US](https://longbridge.com/en/quote/OIH.US.md) - [516570.CN](https://longbridge.com/en/quote/516570.CN.md) - [UCO.US](https://longbridge.com/en/quote/UCO.US.md) - [CRAK.US](https://longbridge.com/en/quote/CRAK.US.md) - [600028.CN](https://longbridge.com/en/quote/600028.CN.md) - [516120.CN](https://longbridge.com/en/quote/516120.CN.md) - [00386.HK](https://longbridge.com/en/quote/00386.HK.md) - [601857.CN](https://longbridge.com/en/quote/601857.CN.md) - [EMLP.US](https://longbridge.com/en/quote/EMLP.US.md) - [XES.US](https://longbridge.com/en/quote/XES.US.md) - [XLE.US](https://longbridge.com/en/quote/XLE.US.md) - [IEZ.US](https://longbridge.com/en/quote/IEZ.US.md) - [01033.HK](https://longbridge.com/en/quote/01033.HK.md) - [BNO.US](https://longbridge.com/en/quote/BNO.US.md) - [USO.US](https://longbridge.com/en/quote/USO.US.md) - [IEO.US](https://longbridge.com/en/quote/IEO.US.md) - [603619.CN](https://longbridge.com/en/quote/603619.CN.md) - [BP.UK](https://longbridge.com/en/quote/BP.UK.md) - [OXY.US](https://longbridge.com/en/quote/OXY.US.md) - [VDE.US](https://longbridge.com/en/quote/VDE.US.md) ## Related News & Research - [Inflation surges as nearly the entire country hates Trump’s economy](https://longbridge.com/en/news/286117997.md) - [Land management company EagleRock raises about $320 million in US IPO](https://longbridge.com/en/news/286336834.md) - [Capital Economics sees oil at $150 per barrel through 2027 in an extreme case](https://longbridge.com/en/news/286549728.md) - [Oil futures lose ground in early US trading](https://longbridge.com/en/news/287089289.md) - [Oil rises more than 1% after drone attack on UAE nuclear power plant](https://longbridge.com/en/news/286683769.md)