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David Dierking, The Motley Fool
Sat, May 23, 2026 astatine 5:05 PM CDT 4 min read
Tech stocks are getting each the attraction connected Wall Street close now, but the best-performing assemblage twelvemonth to day is inactive energy. The State Street Energy Select Sector SPDR ETF (NYSEMKT: XLE) is up 32% truthful acold successful 2026, which easy tops the S&P 500's (SNPINDEX: ^GSPC) 8.8% instrumentality and the 23% instrumentality of the State Street Technology Select Sector SPDR ETF (NYSEMKT: XLK).
But each of those gains came during the archetypal 4th of the year. So acold successful Q2, the XLE ETF is down astir 2%, making it the second-worst-performing sector, down lone utilities.
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The communicative close present is astir wholly astir the Iran war. As tensions escalate and lipid prices rise, vigor stocks thin to emergence arsenic good and vice versa. That's an situation that tin make a batch of volatility with small sustainable upside to amusement for it.
As we caput into summertime with the timeline for an Iran warfare solution inactive unknown, is the State Street Energy Select Sector SPDR ETF adjacent worthy considering?
The lawsuit for investing successful XLE is inactive mostly geopolitical
Oil prices person been whipsawing successful 2026, ranging from astir $90 a tube for Brent crude to $120. The biggest catalyst for this, of course, is the sermon emerging from Washington regarding the conflict.
It's hard to accidental what the presumption of the warfare is astatine immoderate fixed moment. We've seen ceasefire agreements mostly neglect to beryllium honored. The Strait of Hormuz is inactive efficaciously blocked. The code of rhetoric tends to displacement from antagonistic to conciliatory rather frequently.
In general, that means nary 1 truly knows what to expect. If the struggle yet gets resolved, we're apt to spot lipid prices diminution again. As that happens, vigor institution stock prices are apt to autumn arsenic good since margins would beryllium shrinking.
From a cardinal standpoint, S&P 500 vigor assemblage net are forecast to ascent 57% successful calendar twelvemonth 2026, truthful overmuch of the stock terms appreciation has been justified. However, net are expected to shrink by 5% successful 2027. Valuations are already elevated, and stock prices could get punished if net maturation trends are negative. With the geopolitical headwind of little vigor prices besides successful play, risk/reward appears tilted to the downside.
XLE: Performance and cardinal metrics
| Expense ratio | 0.08% |
| Assets nether management | $42.4 billion |
| 1-year return | 41.3% |
| No. of holdings | 21 |
| Top holdings | ExxonMobil (23%), Chevron (17%), ConocoPhillips (7%) |
Source: State Street.
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