On Monday, oil prices surged sharply after President Donald Trump announced a blockade on Iran in the Strait of Hormuz, leading West Texas Intermediate crude to rise 9.4% to over $78 per barrel and Brent crude to increase 9.6% to just above $83.
Jim Cramer of CNBC noted that this spike in oil prices is causing a familiar rotation in the stock market, where investors typically gravitate towards companies that benefit from higher gasoline prices while selling off those more susceptible to increased fuel costs.
Cramer highlighted Valero Energy as a top pick, citing its ability to capitalize on tight refining capacity, which resulted in a roughly 5% increase in its shares. He also pointed out Dow Inc. as a strong contender due to its use of cheaper domestic energy, leading to a more than 4% rise in its stock.
Additionally, Cramer mentioned fertilizer producer Mosaic, which stands to gain from higher energy costs, as it could become a low-cost producer if Gulf production is disrupted, resulting in nearly a 4% gain in its shares.
Cramer also discussed the potential benefits for discount retailers during periods of rising oil prices, suggesting that Walmart and TJX Companies are better positioned than dollar stores, with Walmart's stock rising nearly 1% and TJX's down about half a percent.
Overall, while the broader market saw declines, these specific stocks demonstrated relative strength, indicating a strategic shift in investor behavior in response to rising oil prices