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War, Market Volatility and $100 Oil: Is Now the Right Time to Buy Energy Stocks and ETFs?
By MONEY RESEARCH COLLECTIVE
Oil prices soar amid Iran conflict, sparking market turmoil and renewed investor interest in energy stocks.
***Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.***
As the war with Iran enters its second week, oil prices continue to surge, hitting their highest levels since 2022. The fallout has resulted in elevated stock market volatility, which in turn has pushed down the major indices and impacted the decisions of Wall Street’s institutional buyers and sellers, as well as retail traders.
But for those looking to hedge against ongoing portfolio losses, the recent spike in commodity prices affords astute investors an opportunity to use the situation in the Middle East to their advantage in the short term.
Oil prices return to pandemic levels
Last week’s escalations in military operations have led Iran to effectively close the Strait of Hormuz, the roughly 90-mile-long, narrow maritime choke point connecting the Persian Gulf with the Gulf of Oman that is critical to global oil trade.
According to the U.S. Energy Information Agency, approximately 20 million barrels of oil — the equivalent of about 20% of total global petroleum consumption — is shipped through the strait daily.
The price of Brent crude, the global oil benchmark, now sits at $105 per barrel, while the U.S. benchmark, West Texas Intermediate, hovers around $103 per barrel. Both of those figures are the highest since July 2022.
That supply pinch is already translating to higher prices at the pump. According to both GasBuddy and AAA, the average price per gallon of gasoline in the United States is currently $3.47, up from $2.90 per gallon just one month ago.
On Sunday, CNN reported that diesel fuel price increases are outpacing gasoline, noting an “84 cent increase, or 22% rise in diesel prices, taking a gallon of that critical fuel to $4.60.”
But the increase in oil prices isn’t impacting just drivers. The oil majors — including ExxonMobil, Chevron and Shell — produce an array of petroleum products, from industrial chemicals and aviation fuel to heating oil and diesel fuel, all of which are seeing dramatic price increases.
Meanwhile, heating oil is up 86% from where it started the year, and the price of kerosene-based aviation fuel, which requires around 200 hydrocarbon compounds in order to produce effective high-altitude, low-temperature performance, is also up sharply. The spot price of jet fuel is currently 204% higher than its 20-year low in April 2020, according to the U.S. Energy Information Agency.
As volatility climbs, the market suffers
With uncertainty again gripping the markets, the CBOE Volatility Index (VIX) — a popular measure of the stock market’s expectation of volatility — is up 106% in 2026. Since the coordinated U.S.-Israeli attacks on Iran began on Feb. 28., the VIX is up 50%.
Meanwhile, that heightened volatility has pushed the Nasdaq down 1.69%, the S&P 500 down 2.71% and the Dow Jones Industrial Average down 4.03%.
But as the market broadly turns red, one sector in particular has been in the green: energy. Before the conflict began this year, the energy sector had already been outpacing the other 10 S&P 500 sectors for the first time since 2022.
Energy’s year-to-date (YTD) gain stands at nearly 27%. For context, the S&P 500’s YTD loss is 2.49%, while the tech sector has struggled with a YTD loss of 4.64%.
Going forward, more outperformance could be in store. Integrated oil companies — the large, vertically integrated corporations that manage the entire petroleum value chain — have their hands in all aspects of the petroleum production lifecycle, making them well-positioned to pass on increased input costs through numerous markets, not only recouping their costs in the process but also expanding their profit margins in doing so.
Surging oil prices are an investment opportunity
The stocks of most Big Oil companies remain safe bets going forward, as they were already among the top performers in 2026 and are benefiting from a natural market cycle. Before the war began, energy’s S&P 500-leading gains were the result of a rotation out of speculative and high-flying AI and software stocks.
Since late last year, runaway tech valuations and fears of an AI bubble have encouraged investors to partake in a flight to safety. Energy stocks, which have been undervalued by comparison, have been one of a handful of beneficiaries. While that gap in valuation is tightening, shares of the oil majors are still trading at attractive prices given their financial performances.
Investors can also gain broad exposure to energy through sector exchange-traded funds (ETFs) — diversified baskets of stocks bundled together often thematically — such as the Energy Select Sector SPDR Fund, or XLE.
As the world’s largest energy ETF, the XLE has more than $39 billion in assets under management, a low expense ratio of 0.08% and a dividend that currently yields 2.56%, or $1.46 per share annually. The fund has gained nearly 25% in 2026.
But more important than its low fees and outperformance this year, the XLE holds numerous major energy stocks, including ExxonMobil, Chevron, ConocoPhillips, SLB (formerly Schlumberger), Phillips 66, Kinder Morgan, Baker Hughes, Valero Energy, Marathon Petroleum, Diamondback Energy and 15 other big-name companies that are heavily involved in the fossil-fuel supply chain.
The fund has been particularly popular among Wall Street’s institutional investors over the past year, with inflows exceeding $15 billion versus outflows of just over $2 billion, indicating that the so-called “smart money” has been taking advantage of energy’s undervaluation.
According to Investing.com, analysts at KeyBanc noted last week that despite the Iranian crisis still unfolding, the energy trade remains intact, with current valuations failing to reflect a tightening supply outlook. The research note highlighted how analysts “see oil prices rallying temporarily, creating a cyclical trade on top of the [rotational] trade we see for oily equities.”
For those looking to hedge against ongoing losses in more susceptible corners of their portfolios, increasing exposure to energy can help offset any underperformers.
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