Cramer points to refiners, chemicals and discounters as oil rises

Oil’s sharp move higher on Monday prompted a familiar shift in U.S. equities, with CNBC’s Jim Cramer saying investors moved toward companies seen as beneficiaries of rising fuel prices. West Texas Intermediate crude rose 9.4% to settle above $78 a barrel, while Brent crude advanced 9.6% to just over $83, according to CNBC.

The rise followed President Donald Trump’s announcement that he was reinstating a blockade on Iran in the Strait of Hormuz, CNBC reported. The broader equity market weakened at the start of the week, with the S&P 500 closing nearly 0.8% lower and the Nasdaq Composite down about 1.5%.

On CNBC’s “Mad Money,” Cramer described the market reaction as a set of “Pavlovian trades,” referring to stocks that investors tend to buy when crude prices rise. He said the pattern reflected a rotation into businesses that may be able to pass through higher energy costs, gain a cost advantage over foreign competitors or attract consumers trying to stretch household budgets.

Refiners and energy-linked manufacturers

Cramer identified refiners as one group likely to draw investor interest because they sell fuel products and can reflect higher costs quickly in pump prices. He named Valero Energy as his preferred refiner in that context, calling it the most direct exposure to a market with constrained refining capacity. Valero shares rose about 5% on Monday, according to CNBC.

The refining business depends partly on the spread between the cost of crude oil and the market price of gasoline, diesel and other refined products. When supply disruptions or capacity limits push product prices higher, refiners may see stronger margins if they can pass costs through faster than their own input expenses rise.

Cramer also pointed to Dow Inc., saying the U.S. chemical producer could benefit if Persian Gulf disruptions affect overseas rivals. He said Dow’s use of lower-cost domestic energy improves its position relative to producers more exposed to the region. Dow shares gained more than 4% in Monday trading, CNBC reported.

Mosaic, the fertilizer producer, was another company Cramer highlighted. He said higher energy costs and Gulf disruption would make Mosaic more competitive because fertilizer is a commodity market and producers with lower input costs can gain an advantage. Mosaic shares rose nearly 4% during the session.

Retailers seen as potential relative winners

Cramer said discount and off-price retailers can also attract interest when oil climbs, because higher gasoline prices can pressure household budgets and push shoppers toward lower-priced retailers. He said dollar stores fit that general theme, but he preferred Walmart and TJX Companies.

Walmart shares rose nearly 1% on Monday, while TJX slipped about 0.5%, according to CNBC. Despite the mixed moves, both outperformed the broader Nasdaq and S&P 500 on the day.

Cramer said Walmart’s price cuts could help draw shoppers back after what he described as a weaker quarter. He also called TJX “the real bargain,” saying the off-price retailer could benefit if traditional retailers sell excess inventory into its channel.

The comments were market commentary from Cramer and not a company forecast from the businesses named. The stock moves cited were Monday’s session changes reported by CNBC.

This story draws on original reporting from CNBC.