Although the stock market has been under pressure in recent weeks as economic strains mount, the energy sector has emerged as the top performer in the first three months of 2026.
The Iran conflict triggered what may be the largest oil supply shock in history, with oil prices surging 39%. Now, the big moment may belong to the oil companies. Historical patterns suggest oil prices will likely retract in April, potentially falling to $80, though prices should remain elevated versus pre-war levels. This scenario benefits the shares of oil companies. Risks include a smaller safety margin and concentration of XLE.
The war in Iran has led to a surge in the price of oil recently. Officials in Iran warn that the price could hit $200 per barrel.
USO and other ETFs surge as the Middle East conflict disrupts the Strait of Hormuz, pushing oil above $100 and lifting profits across the global oil industry.
Designed to provide broad exposure to the Energy - Broad segment of the equity market, the State Street Energy Select Sector SPDR ETF (XLE) is a passively managed exchange traded fund launched on December 16, 1998.
The Energy Select Sector SPDR Fund ( NYSEARCA:XLE ) has surged 21.6% year to date as markets pivot from energy transition rhetoric toward energy security concerns.
State Street Energy Sector Select ETF is a fund built on oil stocks, primarily integrated energy companies and E&Ps, plus a few midstream companies. XLE has a relatively low P/E ratio, a 2.7% dividend yield, and a low 0.08% management fee. Notably, the fund's companies benefit from rising AI-driven energy demand.
XLE: Energy Stocks Remain A Strong Buy Long Term (Technical Analysis)
Energy Select Sector SPDR Fund has outperformed in 2024, delivering a 19% return and breaking out to all-time highs. XLE's surge is driven by technical breakouts, geopolitical catalysts like Venezuela, and strong performance from top holdings XOM and CVX. Fundamentals remain mixed: earnings are recovering, but oil prices remain subdued, and EPS growth is estimated at 5.94% over 3-5 years.
When the beat changes, investors switch up their moves. Last week, they rushed to re-tune their portfolios.
Entering 2026, forecasts for the performance of the energy sector were tempered, with analysts pointing to a global oil surplus and consequently weaker demand. After mustering a gain of just 8.7% in 2025—good for fourth worst among the S&P 500's 11 sectors—expectations remained low this year.
Passive investors looking to take on a more contrarian position may wish to consider some of the sectors that most investors may be ignoring as the rise of the artificial intelligence (AI) boom continues.