We continue to favour downside plays given the escalating Middle East conflict, and turn to the chemicals sector, the strongest performer amongst cyclicals over the past two weeks. With oil prices elevated, risks to the broader business cycle still do not appear fully reflected in valuations, and we identify BASF as it has outperformed the sector both in price performance and valuation. Although the 2026 EBITDA guidance of EUR6.2-7.0bn (versus EUR6.5bn in 2025) initially looked achievable after the 4Q25 results, it was predicated on conservative assumptions of USD65/bbl Brent, 2.7% GDP growth and 2.4% chemical production growth. These assumptions are now at risk given persistently high oil prices. The proposed EUR2.25 dividend and ongoing EUR1.5bn buyback also assume an improving free-cash-flow profile that may need to be revised lower, as occurred in 2025. In light of elevated volatility (3M ATM IV 3YPc93), we propose long June 2026 42 puts, financed by June 2026 48/52 call spreads, costing of 1.3% of the underlying.