Here’s a fun puzzle for you. The Energy Select Sector SPDR Fund (XLE) is up 25% this year. It’s the runaway best performer in the S&P 500. And yet, it’s also the only sector that’s deep in the red since President Donald Trump started talking about ending the war in Iran.
So which is it? A winner or a loser? According to Ed Yardeni, one of Wall Street’s most-followed strategists, it’s a winner that’s currently on sale. This week, Yardeni flipped back to an overweight rating on Energy after giving up on the sector two years ago. His message to clients is pretty simple: the recent pullback is a gift.
“We are inclined to use the recent selloff to overweight the sector,” Yardeni wrote in a note on Monday.
The core of his argument is that the market is getting ahead of itself. Investors are pricing in a neat and tidy end to the conflict. Yardeni thinks that’s the wrong read. The damage—both physical and psychological—is going to stick around for a while, and oil prices aren’t going back to where they were.
The Old Oil Price Range Is Officially Retired
Let’s talk about the new normal for oil. Yardeni’s thesis is that Brent crude now lives in a $75-to-$95 range. The cozy pre-war world of $55-to-$75? That’s over.
He points to two forces making this shift permanent. First, there’s the actual, physical damage to energy infrastructure around the Arabian Gulf. You can’t fix that with a handshake and a peace treaty. Second, there’s what he calls a “structural repricing” of confidence. Even if the Strait of Hormuz reopens tomorrow, the cost of maritime insurance and the general skittishness about moving oil through that chokepoint aren’t just going to vanish.
As he puts it: “The supply shock is likely to have a long tail.”
He’s not alone in this thinking. Bank of America’s commodity team, led by Francisco Blanch, is in the same neighborhood. In their weekly note, they project Brent will average $93 a barrel this year, potentially peaking at $103 in the second quarter before easing back toward $78 in 2027. Their math shows a massive deficit—about 4 million barrels per day—in the current quarter, thanks to OPEC disruptions tied to the war.
Over at Goldman Sachs, the models point to something like $80–$90 Brent in similar scenarios. So Yardeni’s $75–$95 call isn’t some wild outlier; it’s sitting comfortably inside the Wall Street consensus band. The floor for oil prices has been permanently raised.
From First To Worst (In A Matter Of Weeks)
This brings us back to that puzzle about the energy sector. To understand the opportunity Yardeni sees, you need to look at how violently the trade has reversed.
Heading into late March, the energy ETF wasn’t just winning; it was lapping the field. By March 27, XLE was up a stunning 40.84% for the year. Crude was above $100 a barrel, and energy stocks were the only game in town.
Then, on April 7, Trump announced a two-week ceasefire. The trade flipped hard. While XLE is still the year-to-date leader at +25.22%, its lead has been cut in half over the past three weeks. More tellingly, since the prospect of an end to the war emerged, XLE has fallen 10.24%. That’s the worst performance of any S&P 500 sector over that period. Every other sector is in the green or basically flat.
Here’s a snapshot of how the sectors stack up:
Data: Countryetftracker.com – U.S. Sector & Industry ETFs Performance Tracker
The Valuation Case: Energy Is Suddenly Cheap
This is where Yardeni’s call gets interesting beyond just the oil price forecast. It’s a valuation story.
After this selloff, XLE trades at roughly 16 times forward earnings. Let’s put that in context. The S&P 500 (SPY) trades at 23.9 times. The red-hot technology sector? Try 30 times.
What this means is that energy stocks are pricing in a much worse outcome for oil than the companies’ own cash flows would suggest, even if Brent drifts down to the lower end of that new $75–$95 range.
So, what are the possible paths from here? The bear case is simple: a US-Iran deal gets confirmed, Brent resets below $80, the war-risk premium in insurance evaporates, and XLE gives back a big chunk of its year-to-date gains.
The bull case is also simple: the ceasefire falls apart, the Strait of Hormuz stays blocked through the summer, and oil headlines send stocks like Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), and ConocoPhillips (COP) racing back toward their March highs.
Yardeni’s argument cuts through the noise of these two scenarios. He’s saying that in both outcomes—deal or no deal—Brent oil is likely to settle above its old pre-war range. And at 16 times earnings, energy stocks aren’t pricing in either of those more favorable realities. The market, in his view, is still betting on a return to the past. He thinks that bet is wrong, and that makes the current dip a buying opportunity.
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