The Non-Defense Winner Investors Missed in the Iran War Supply Shock

While defense names grabbed the headlines in the immediate aftermath of the start of the Iran war, an unlikely winner emerged from the ensuing shock to the market, with gains of 75% year to date? Chemical stock Dow (NYSE:DOW | DOW Price Prediction) has seen its shares do exactly that.

The broader market has wrestled with supply shocks and inflation fears, yet this non-defense name has climbed from about $23.11 at the start of the year to trade nearly $40 per share. That outpaces the S&P 500 and turns a 2025 net loss into a surprising comeback story. Let’s see exactly how it happened.

Dow’s Bold Restructuring Bet

Dow did not wait for the world to improve. Earlier this year, the company launched its Transform to Outperform program, a plan targeting at least $2 billion in near-term operating EBITDA gains. Two-thirds come from productivity and cost cuts, including roughly 4,500 job reductions. The remaining one-third targets growth through AI, automation, and better customer service.

Dow expects $500 million of that benefit to hit 2026 results. That figure builds on the $1 billion cost-savings program already underway. In its Q4 earnings release, CEO Jim Fitterling noted the moves would deliver step-change improvements even as full-year 2025 net sales hit $40 billion and the company posted a $2.4 billion GAAP net loss.

Here’s what the numbers tell us: investors bought the plan. Shares jumped on the announcement and kept climbing because the math showed a clear path to higher returns despite the prior year’s red ink.

Petrochemical Shortages Fuel the Fire

Then the Iran war changed the equation. On March 27, Fitterling told attendees at the CERAWeek by S&P Global conference that petrochemical shortages and price spikes from the conflict would likely persist through the end of the year. His comments highlighted disruptions in feedstock and logistics that tightened global supply, especially for polyethylene and derivatives.

Dow’s low-cost U.S. Gulf Coast assets suddenly looked like a safe, reliable alternative to affected regions. The result? Higher realized prices and better margins for a company that had battled overcapacity from China and soft demand in Europe. Believe it or not, a war half a world away handed Dow pricing power that internal efforts alone could not create.

No matter how you slice it, the combination worked. Restructuring delivered the setup; supply shocks delivered the spark.

The Numbers That Matter

Let’s compare Dow directly to two close peers using the most recent available data.

• Dividend yield: Dow pays $1.40 per share annually for a 3.5% yield. Eastman Chemical (NYSE:EMN) yields 4.3%. LyondellBasell (NYSE:LYB) sits near 5.9%. Dow’s payout ratio sits at a negative 38% because of 2025 losses, and the company cut its dividend 50% last July.
• Valuation: Dow trades at a forward P/E of about 37x on expected recovery earnings. LyondellBasell carries a much lower multiple of 17. Trailing free cash flow remains negative at roughly $1.6 billion for the last 12 months, but the $2 billion EBITDA target aims to flip that script.
• 2026 benefit: Dow projects $500 million in-year EBITDA lift. Eastman looks to save between $125 million and $150 million through a cost-cutting program, while LyondellBasell estimates $1.3 billion by the end of 2026 via its Cash Improvement Plan.

Granted, risks remain. Negative free cash flow means the balance sheet still needs watching, and any quick resolution in the Middle East could ease prices. That said, Dow’s cost actions and U.S. asset advantage give it operating leverage that its peers lack right now.

Key Takeaway

In short, Dow turned an unlikely war-driven supply crunch into a 75% stock gain by pairing it with a $2 billion self-help plan that starts delivering $500 million this year. Smart investors see a company that fixed what it could control and benefited from what it could not. 

The stock has run hard, so watch its earnings report later this month for confirmation that margins are sticking. If they do, Dow offers a data-backed way to own the chemical recovery without chasing pure defense plays. Buy a few shares if you want exposure, or add on any pullback below $35. Either way, the numbers now point to a clearer runway than they did one year ago.