Investing in energy stocks is different from investing in most other sectors because investors have to contend with both demand destruction and supply shock.
Demand destruction occurs when high prices or weak macroeconomic conditions reduce consumption, such as a pandemic lockdown. A supply shock occurs when production or transportation capacity is disrupted due to wars, sanctions, natural disasters or underinvestment.
Most sectors are more insulated from these swings. For example, defensive sectors such as consumer staples, utilities and health care tend to provide products and services with relatively inelastic demand, making them less cyclical and less vulnerable to boom-and-bust conditions.
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Energy, by contrast, is highly exposed to these forces and, in 2026, the market is experiencing a major supply-side shock. According to Finviz, the energy sector is up 30.3% year to date, outperforming even technology’s AI boom, at 16.1%.
Much of this has been driven by the ongoing U.S.- and Israel-backed conflict with Iran, which has entered its third month and severely disrupted shipping traffic through the Strait of Hormuz.
“Volatility tied to the Strait of Hormuz has reinforced the strategic importance of domestic energy infrastructure and supply chains,” explains Mark Marifian, head of product at Tortoise Capital. “With roughly 20 million barrels per day typically flowing through the strait, recent disruptions have constrained flows by more than 90%.”
According to the International Energy Agency, global oil supply has fallen by 10.1 million barrels per day to roughly 97 million barrels per day in March, reflecting declines across both OPEC and non-OPEC producers.
These supply disruptions have created major ripple effects throughout the global economy. Airlines have been among the hardest hit, with carriers such as Air India reducing routes to Canada and others like British Airways raising fares to offset soaring fuel costs.
Oil producers, however, have benefited significantly. Supermajors like BP PLC (ticker: BP) and Shell PLC (SHEL) have both reported surging profits and windfalls amid higher crude prices. Oil executives have also warned that supply restoration may take considerable time.
The longer these disruptions persist, the greater the likelihood that higher energy costs spread into the broader economy. Energy is a foundational input for transportation, manufacturing, agriculture and utilities, meaning inflationary pressure can eventually extend far beyond prices at the pump.
For investors, energy exchange-traded funds, or ETFs, may provide a way to hedge against some of these pressures while gaining diversified exposure to the sector. ETFs allow investors to access baskets of energy companies with the trading flexibility and liquidity of a single stock.
Here are some of the best energy ETFs to buy in 2026:
| ETF | Expense ratio |
| Vanguard Energy ETF (VDE) | 0.09% |
| State Street Energy Select Sector SPDR ETF (XLE) | 0.08% |
| State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP) | 0.35% |
| Tortoise North American Pipeline ETF (TPYP) | 0.40% |
| Tortoise MLP ETF (TMLP) | 0.50% |
| VanEck Oil Refiners ETF (CRAK) | 0.61% |
| VanEck Oil Services ETF (OIH) | 0.35% |
Vanguard Energy ETF (VDE)
“A broad, index-based ETF like VDE offers low-cost access to the full energy sector, from large, established producers to key service and midstream companies,” says Kathy Kellert, head of index equity product at Vanguard. “Rather than trying to forecast commodity prices, which can be volatile and cyclical, investors may be better served using VDE as part of a balanced, long-term investment strategy.”
VDE is also highly affordable, charging just a 0.09% expense ratio. On a $10,000 investment, that works out to roughly $9 per year in fees. The ETF tracks more than 100 energy companies through the MSCI US Investable Market Energy 25/50 Index. Because the portfolio is market-cap-weighted, Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) dominate the ETF with weights of roughly 23% and 15%, respectively.
State Street Energy Select Sector SPDR ETF (XLE)
XLE undercuts VDE by one basis point, with a 0.08% expense ratio. This ETF holds a concentrated portfolio of just 21 large-cap energy companies drawn from the S&P 500. Investors will find similar heavy exposure to ExxonMobil and Chevron, though at even higher portfolio weights than VDE. XLE is also highly popular among traders due to its tight bid-ask spread and deep, liquid options market.
“Overlooked by investors, energy stocks were already gaining momentum before the Feb. 28 conflict started,” says Michael Arone, chief investment strategist and managing director at State Street Investment Management. “Expectations for a global cyclical upswing, combined with lighter regulation, disciplined capital spending, and ongoing innovation in exploration and production helped.”
State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
“After a decade of focusing on efficiency and doing more with less, energy companies are now beginning to benefit from what could be a meaningful increase in their revenue outlook,” Arone says. Because their revenues are closely tied to commodity prices, rising oil prices can quickly translate into stronger cash flows and profits for upstream energy companies. Investors can access this segment via XOP.
Unlike many sector ETFs, XOP uses an equal-weight methodology rather than market-cap weighting. That means all 49 holdings receive roughly the same allocation regardless of company size, introducing a natural “buy low, sell high” rebalancing effect over time. The structure also reduces concentration risk in mega-cap oil producers. XOP charges a 0.35% expense ratio and currently pays a 1.8% 30-day SEC yield.
Tortoise North American Pipeline ETF (TPYP)
“Investors are increasingly recognizing that North American energy infrastructure provides both stability and income, even as global markets face a potential 15-to-16-million-barrel-per-day export deficit,” Marifian says. “The U.S. operates one of the most resilient and flexible energy systems in the world, with pipelines, storage and export capacity helping to insulate domestic markets.”
Energy infrastructure falls into the midstream segment, which includes companies involved in transporting, storing and exporting oil and natural gas. Investors looking to capitalize on the relative stability of North American energy infrastructure can use TPYP. Top holdings include TC Energy Corp. (TRP), Enbridge Inc. (ENB), Williams Cos. Inc. (WMB), Kinder Morgan Inc. (KMI) and Oneok Inc. (OKE).
[Read: 5 Best LNG Stocks to Buy in 2026]
Tortoise MLP ETF (TMLP)
“With global supply chains under pressure and futures markets reflecting elevated risk premiums, the importance of U.S. natural gas infrastructure and liquefied natural gas (LNG) exports also continues to rise,” Marifian says. “The U.S. has emerged as a leading LNG supplier, leveraging its vast pipeline network and export capacity to deliver energy to global markets when it’s needed most.”
The majority of TPYP’s midstream exposure comes through incorporated pipeline operators, but investors can also access the segment through master limited partnerships, or MLPs. Many investors avoid owning MLPs directly because they issue Schedule K-1 tax forms. TMLP avoids this issue by structuring itself as a regulated investment company and using total return swaps for MLP exposure.
VanEck Oil Refiners ETF (CRAK)
The downstream segment focuses on refining crude oil into usable products such as gasoline, diesel, jet fuel and petrochemicals. For these companies, the “crack spread” measures the difference between the price of crude oil and the refined petroleum products produced from it, making it a key profitability metric for refiners. Investors can access this segment through CRAK at a 0.61% expense ratio.
“We believe the current dynamic is constructive for crack spreads, particularly for complex refiners with access to discounted crude supplies,” says Andrew Musgraves, vice president and senior product manager at VanEck. “With global refining capacity still relatively constrained, refiners remain one of the clearest ways to express that imbalance.” Year to date, CRAK has returned 34.7% through April.
VanEck Oil Services ETF (OIH)
Energy services companies provide the drilling equipment, engineering, staffing and field services needed to explore for and produce oil and natural gas. Exposure to the segment can be achieved through OIH, which has surged 57.6% year to date through April. The ETF’s index methodology favors the largest and most liquid companies such as SLB NV (SLB) and Halliburton Co. (HAL).
“OIH captures the oil services segment, which is directly leveraged to upstream capital spending and the ongoing need to sustain and grow global energy supply,” Musgraves explains. “Current geopolitical tensions involving Iran reinforce the importance of energy security and are likely to support continued investment in exploration and production.” OIH charges a 0.35% expense ratio.
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7 Best Energy ETFs to Buy Now originally appeared on usnews.com
Update 05/13/26: This story was published at an earlier date and has been updated with new information.
