JPMorgan has revised its view of European chemicals stocks, issuing a series of rating changes and trimming forecasts for the medium term as analysts warn that a short-lived boost tied to the Middle East conflict may be receding.
"While the duration of the Middle East (ME) conflict remains difficult to call, recent datapoints suggest that any associated near-term tailwinds for cyclical chemical stocks may be lower than expected, and may already be fading," the bank's analysts wrote.
On the heels of that assessment, JPMorgan downgraded Arkema, Evonik, and IMCD from Neutral to Underweight, and moved Lanxess down to Neutral from Overweight. At the same time the team upgraded Clariant to Overweight, saying the stock's selloff represented an "attractive entry point."
The central thesis in the report is that disruptions to chemical supply chains stemming from the Middle East created a meaningful but temporary tailwind for firms exposed to those product chains during the second and third quarters of 2026. JPMorgan now anticipates those effects will abate, and expects 2027 estimates to be revised down sharply once the temporary boost unwinds.
In the bank's downgrade of Evonik the analysts wrote: "Near-term earnings tailwinds from the Middle East conflict may be fading," and noted that the stock remained roughly 20% above pre-conflict levels despite what they described as a deteriorating structural outlook.
For BASF, the largest chemical group in Europe, JPMorgan lifted its second-quarter and full-year 2026 estimates to reflect the conflict-related uplift, but trimmed 2027 forecasts by a similar magnitude. The bank placed BASF on a negative catalyst watch ahead of its Q2 results in July, flagging forecasts that indicate downside risk to consensus in the second half. The analysts added: "In our view, BASF's valuation also remains disconnected from challenged fundamentals," and maintained an Underweight rating.
Arkema saw a comparable treatment. JPMorgan increased near-term numbers to capture conflict-related benefits across its Primary Materials and Coating Solutions units, but applied a sharp cut to 2027 estimates. The analysts described Arkema's mid-term earnings and return on invested capital picture as "challenging due to a combination of structural and cyclical headwinds."
The bank also trimmed its 2026 estimates for Solvay, saying the conflict appeared to be "a net headwind in 2Q" for the group.
JPMorgan's report placed particular emphasis on the distributor segment, where the outlook appears more fragile. IMCD was downgraded to Underweight amid warnings of ongoing structural pressures, including uncertainty over whether Chinese producers will continue to sign exclusive supply agreements with specialty distributors. For Azelis the bank left the rating at Neutral but pointed out that 2026 would likely be the fourth consecutive year of organic earnings decline for that distributor subgroup.
At the same time, analysts retained Overweight ratings on a group of names they view as having cleaner structural growth or more differentiated product exposures. Those names include Croda, Novonesis, Fuchs, Solvay, Syensqo, and Umicore. Novonesis in particular remained JPMorgan's top pick in the sector - the bank argued the stock's steep underperformance over the prior year appeared unsupported given consistent earnings delivery and potential upside from geopolitical tailwinds.
The report's mix of downgrades, tactical upgrades and reiterated preferences highlights a bifurcated sector - companies with transient exposure to conflict-related supply dislocations face greater downside risk once that support fades, while firms with differentiated portfolios or steadier growth characteristics have been reaffirmed.