Iran war winners Dow, LyondellBasell downgraded by Bank of America

Dow, Inc. and LyondellBasell — two petrochemicals stocks that surged as markets priced in shortages due to the closure of the Strait of Hormuz — should decline as investors focus on the long-term outlook for normalized petrochemical prices once the war resolves, Bank of America analysts wrote in a note downgrading the two stocks Monday.

BofA moved its rating on the shares from “neutral” to “underperform,” writing:

“Over time, as chemical markets normalize, we expect 1) investor focus to shiſt back to ‘normal’ or ‘sustainable’ earnings profiles and 2) the conflict to resolve without material asset rationalization, both of which likely bias shares lower over the next twelve months.”

Analysts also lowered their stance on another petrochemicals and building materials stock, Westlake, to “neutral” from “buy.”

While cutting those ratings, BofA actually raised its more near-term price targets for the shares. It upped LyondellBasell to $68 from $55, and Dow to $35 from $31.

But those price targets still imply declines of more than 10% compared to where both shares were trading late Monday morning. Both stocks are up roughly 30% since the start of the Iran war.