Best Oil ETFs to Buy in 2026

The Energy Select Sector SPDR ETF (NYSEMKT: XLE), the largest exchange-traded fund (ETF) dedicated to this sector, is up 32.07% thanks in large part to the war in Iran. None of the other 10 Sector SPDR ETFs comes anywhere close to matching that performance.

The bellwether energy fund ranks among this year's best energy ETFs because its top holdings are benefiting from geopolitical events, including the war in Iran and, before that, the removal of former Venezuelan President Nicolas Maduro. ExxonMobil and Chevron, which combine for more than 39% of the ETF's roster, are up 28.49% and 26.3%, respectively, year to date.

Investors don't have to scramble to find some of the best oil ETFs. Image source: Getty Images.

For many investors, the SPDR ETF's exposure to the two largest U.S. oil stocks and its clear ties to oil prices are valid reasons to invest in this fund. To be sure, those are legitimate considerations, but other funds warrant a place in the conversation about the best oil ETFs.

Get more breadth with this Fidelity ETF

The Energy Select Sector SPDR ETF is a favorite of many energy investors because it effectively represents the universe of large-cap domestic energy stocks. On the other hand, that leads to a relatively small lineup of just 22 holdings.

Investors seeking a broader view of the energy sector might like the Fidelity MSCI Energy Index ETF (NYSEMKT: FENY). On the surface, this Fidelity ETF has a lot in common with its SPDR rival, including massive exposure to Exxon and Chevron, and the same 0.08% annual fee ($8 on a $10,000 investment).

Where these two ETFs noticeably depart is roster size. The Fidelity ETF is home to 101 holdings, more than quadruple the size of the SPDR ETF. Think of it as a total market approach to the energy sector. Over shorter holding periods, the performance differences between these two ETFs are minor, but over longer time frames, the Fidelity fund's inclusion of more smaller stocks has worked in investors' favor. For the three years ending April 29, this Fidelity ETF has returned 43.9%, beating its SPDR competitor by more than 400 basis points.

Assessing AMLP for dividends

There are plenty of oil dividend stocks on the market, but the universe of oil ETFs doesn't lean into the equity income theme in uniform fashion. Among oil ETF dividend royalty, there's the Alerian MLP ETF (NYSEMKT: AMLP).

This $12.25 billion ETF, which turns 16 years old in August, sports a distribution yield of 7.54%. It's a concentrated basket of pipeline stocks and midstream fare as its top six holdings account for more than 62% of the ETF's total weight.

That doesn't equal "diverse" in the traditional sense, but the Alerian MLP ETF offers diversification in other ways. First, it can be paired with traditional oil ETFs because it doesn't hold shares of integrated oil majors like Chevron and Exxon. Second, while pipeline stocks can benefit from higher energy commodity prices, they aren't as closely tied to oil and natural gas prices as their upstream counterparts. In fact, pipeline operators can experience long periods of relatively low correlations to oil and natural gas prices.

Examining XOP

Up 40.73% year to date, the SPDR Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) has already earned its stripes as one of this year's best oil ETFs. It's possible that the trend continues, and the premise behind that thesis is simple: The war in Iran may be a catalyst for increased oil and gas output here in the U.S.

As it is, production is already at record highs, which is a boon for this ETF's U.S.-focused lineup. Plus, if crude prices remain higher for longer, that could spark more investment by some of this ETF's holdings.

This SPDR ETF can also serve as a complement to the integrated-heavy ETFs in the category, as none of its 50 holdings, with a weighted-average market capitalization of $47.18 billion, carry a weight of more than 2.91%. That gives this ETF an equal-weight feel and reduces single-stock risk.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.