Energy ETFs to Buy as Oil Price Slides to Pre-Iran War Level

The global energy market has experienced a dramatic round-trip. Following a joint U.S.-Israel strike on Iran in late February 2026 and the consequent closure of the Strait of Hormuz, which disrupted nearly 20% of global oil supply, crude prices surged. Resultantly, Brent crude climbed above $100 pe…

However, in a swift turn of events, an agreement between Washington and Tehran near mid-June led to the reopening of the Strait, reversing much of these gains.

The geopolitical risk premium dissolved, and on June 26, oil prices dropped below $72 a barrel, completely wiping out the war premium, touching pre-war levels.

For investors looking at the energy sector, a lower crude price does not necessarily mean the opportunity has vanished. In fact, these low oil prices offer a lucrative entry point, especially through diversified Energy exchange-traded funds (ETFs).

Before identifying these funds, it is crucial to understand how individual energy bigwigs performed during the volatile past few months and whether they offer long-term resilience so that energy ETFs remain a lucrative investment choice.

Divergent Performance of Energy Giants

During the peak of the conflict, oil majors showed mixed operational success. While their stock prices surged on the back of crude price spikes, their mixed first-quarter results highlighted distinct structural differences, hinting at factors beyond raw commodity prices influencing the industry's performance.

Notably, first-quarter 2026 earnings moved in different directions among the five Western oil majors, with profits rising at European firms while declining at their U.S. counterparts.

British oil giant Shell SHEL and French energy major TotalEnergies TTE both reported solid double-digit year-over-year growth in earnings, while London-based oil major BP Plc BP posted a sharp hike of 134% in its bottom line. By contrast, U.S. giants ExxonMobil XOM and Chevron CVX saw a steep double-digit decline in their quarterly earnings.

This divergence was largely because European companies have robust trading and refining businesses that benefit from volatility, while U.S. majors rely more heavily on pure crude extraction.

Oil refiners like Valero Energy VLO, which benefit from widening fuel-to-oil margins, have reported solid first-quarter results, with its bottom line improving a massive 374% year over year. This was driven by VLO’s throughput averaging 2.9 million barrels per day.

What Lies Ahead?

Looking ahead, energy equities possess structural tailwinds like refining margins, natural gas demand, and disciplined capital allocation that can boost the sector beyond raw oil prices.

Natural gas and LNG investments are hitting decade highs as some global supply routes permanently diversify from the Middle East.

U.S. crude oil inventories fell more than expected in the week ended June 12 and were about 6% below the five-year average for the time of year, as net imports decreased and refineries ran near full capacity, as per data released by the U.S. Energy Information Administration (as cited in the Wall Street Journal). This tight physical supply creates a fundamental price floor, suggesting that while the geopolitical war premium has evaporated, further downside risk for oil prices remains strictly limited.

Energy ETFs to Buy

Considering the aforementioned discussion, while the sector offers solid growth opportunities, investing in individual energy stocks navigating headwinds like shifting refining margins might be a risky decision. Instead, one may consider investing in energy ETFs like the ones mentioned below, which offer a safer, more balanced strategy, allowing an investor to capture the sector's potential without betting on a single winner.

State Street Energy Select Sector SPDR ETF XLE

This fund, with net assets worth $36.35 billion, offers exposure to 21 companies in the oil, gas and consumable fuel, energy equipment and services industries. XOM holds the first spot in this fund, with 22.42% weightage, while CVX holds the second position with 16.43% weightage. VLO holds the fifth spot with 4.47% weightage.

XLE has surged 20.4% year to date. The fund charges 8 basis points (bps) as fees and traded at a good volume of 18.98 million shares in the last trading session.

Vanguard Energy Index Fund ETF Shares VDE

This fund, with net assets worth $11.8 billion, offers exposure to 111 companies whose businesses are dominated by any of the following activities: the construction or provision of oil rigs, drilling equipment, and other energy-related service and equipment; or the exploration, production, marketing, refining, and/or transportation of oil and gas products. XOM holds the first spot in this fund, with 21.86% weightage, while CVX holds the second position with 14.14% weightage. VLO holds the seventh spot with 3.13% weightage.

VDE has soared 20.8% year to date. The fund charges 9 bps as fees and traded at a volume of 0.60 million shares in the last trading session.

iShares Global Energy ETF IXC

This fund, with net assets worth $2.03 billion, offers exposure to 50 global companies that produce and distribute oil and gas. XOM holds the first spot in this fund, with 17.41% weightage, while CVX holds the second position with 9.85% weightage. SHEL holds the third spot with 6.59% weightage, while TTE holds the fourth spot with 5.02%. BP holds the seventh position with 2.99% weightage, while VLO holds the 10th spot with 2.37% weightage.

IXC has rallied 18.2% year to date. The fund charges 40 bps as fees and traded at a good volume of 1.88 million shares in the last trading session.

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