Humans detect real-world object anomalies by perceiving, interacting, and reasoning based on object-conditioned physical knowledge. The long-term goal of Industrial Anomaly Detection (IAD) is to enable machines to autonomously replicate this skill. However, current IAD algorithms are largely developed and tested on static, semantically simple datasets, which diverge from real-world scenarios where physical understanding and reasoning are essential.To bridge this gap, we introduce the Physics Anomaly Detection (Phys-AD) dataset, the first large-scale, real-world, physics-grounded video dataset for industrial anomaly detection. Collected using a real robot arm and motor, Phys-AD provides a diverse set of dynamic, semantically rich scenarios. The dataset includes more than 6400 videos across 22 real-world object categories, interacting with robot arms and motors, and exhibits 47 types of anomalies. Anomaly detection in Phys-AD requires visual reasoning, combining both physical knowledge and video content to determine object abnormality.We benchmark state-of-the-art anomaly detection methods under three settings: unsupervised AD, weakly-supervised AD, and video-understanding AD, highlighting their limitations in handling physics-grounded anomalies. Additionally, we introduce the Physics Anomaly Explanation (PAEval) metric, designed to assess the ability of visual-language foundation models to not only detect anomalies but also provide accurate explanations for their underlying physical causes. Our dataset and benchmark will be publicly available.