Oil Is Up 45% Since the Iran War Began. Is It Too Late to Buy Energy Stocks?
Key Points
The energy sector has been the S&P 500's best-performing sector this year.
Crude oil prices have consistently hovered above $100 per barrel in the past month.
Investors should expect the energy sector to be cyclical and keep a long-term focus.
- 10 stocks we like better than Vanguard World Fund - Vanguard Energy ETF ›
Since the war in Iran began on Feb. 28, it has been a chain reaction that has, unfortunately, weighed on many people's wallets and purses. Iran drastically reduced the number of ships allowed through the Strait of Hormuz, which facilitates the transportation of roughly 25% of the world's crude oil (oil used to make gasoline and diesel). This has increased the price of crude oil by around 45%, pushing it above $100 per barrel.
On the flip side, energy companies have been posting record profits, and energy stocks have surged as investors look to capitalize. But considering the momentum energy stocks have had to start the year, are they still a good choice for someone looking to begin or add to their stake, or has that ship sailed?
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Brent Crude Oil Spot Price data by YCharts
How has the energy sector performed this year?
The S&P 500 categorizes companies into 11 major sectors. This year, the energy sector has outperformed the others by a long shot. Through May 25, the S&P 500 energy sector is up 31.5%. The next three best-performing sectors are tech, real estate, and industrials. The three largest U.S. energy companies by market cap -- ExxonMobil, Chevron, and ConocoPhillips -- are up 28.7%, 25.6%, and 28.7% year to date, respectively.
^SPXNRGS data by YCharts
Is it too late to buy energy stocks?
If you're looking to buy energy stocks hoping to replicate the gains so far this year, the answer is yes: It's probably too late. We can't predict how stocks will perform, but much of the geopolitical uncertainty and rising oil prices have likely been priced into the market.
However, if you're a long-term investor (which you should be), the answer is no: It's absolutely not too late to buy energy stocks. The energy sector is cyclical, flourishing when supply is low and demand is high, and underperforming when the market is oversupplied. Right now, it's near the peak of the cycle, but it won't always be that way. Over the long run, however, the energy sector has shown resilience.
You never want to get in the habit of investing in a company, industry, or sector solely based on current events because they change and may not have long-lasting implications. You should always keep the long term in mind, especially in a cyclical sector like energy, where much of the value comes from compounding and dividends.
Instead of trying to pick the "winner" in the energy sector, I'd recommend investing in an energy exchange-traded fund (ETF) like the Vanguard Energy ETF (NYSEMKT: VDE). It includes 106 energy companies across industries such as drilling, transportation, production, and marketing. It's a great way to gain exposure to the energy sector without worrying too much about the risks associated with individual stocks.
Should you buy stock in Vanguard World Fund - Vanguard Energy ETF right now?
Before you buy stock in Vanguard World Fund - Vanguard Energy ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund - Vanguard Energy ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $472,852!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,317,207!*
Now, it’s worth noting Stock Advisor’s total average return is 984% — a market-crushing outperformance compared to 210% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of May 27, 2026.
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.
Recommended Articles
