With the U.S.-Iran war dragging on and disrupting oil logistics in the Strait of Hormuz, the broader energy sector is among 2026's top-performing market sectors, up about 40% year to date. U.S. crude prices are climbing above $85 a barrel, and energy ETFs are emerging as a key area for investors to watch.
Year-to-date, SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP), United States Oil Fund (NYSE:USO) and VanEck Oil Services ETF (NYSE:OIH) are each in the green.
The rally looks like a return on investment for Big Oil. On the 2024 campaign trail, then-candidate Donald Trump asked oil executives to throw $1 billion toward his presidential campaign, promising policies that would boost the industry's profits. The executives included leaders from Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), Continental Resources, EQT (NYSE:EQT), Cheniere Energy (NYSE:LNG) and the American Petroleum Institute.
Two years later, U.S. West Texas Intermediate crude is hovering above $85 per barrel, reaching its highest level since late July, while Brent crude is trading above $91 per barrel. Oil has risen for a third straight session, and the eight largest oil companies recently reported more than $90 billion in combined Q2 profits.
The Most Direct Crude Bet
The USO is the cleanest tactical vehicle for investors looking to express a view on crude prices through futures.
That distinction matters. USO doesn't own oil companies; it primarily gains or loses based on movements in crude futures. The current futures structure is also favorable: crude is in backwardation, allowing USO and similar funds to benefit from positive roll yield rather than suffering the drag that can occur in contango markets.
The fund has already demonstrated its sensitivity to geopolitical shocks. For instance, on July 29, when WTI jumped 6.7% to $84.56, USO had surged 6.4% in premarket trading, compared with a 2.2% gain for the Energy Select Sector SPDR ETF (NYSE:XLE).
XOP Could Offer More Upside Torque
For investors willing to accept more equity risk, XOP offers a higher-beta way to play sustained crude strength.
XOP is equal-weighted and tilted toward exploration and production companies, meaning smaller producers have a greater influence than they do in large-cap energy funds.
That has translated into moderate outperformance this year. XOP is up more than 45% so far this year, compared with roughly 41% for XLE.
The catch is that XOP's performance can be dampened by production costs, capital spending, equity-market sentiment and company-specific earnings can all dilute or amplify crude's impact.
OIH is the longer-term Hormuz bet
The OIH offers a different second-order play.
Oil services companies benefit when higher crude prices encourage producers to increase drilling and capital expenditure. OIH therefore needs the oil shock to persist, not merely produce a short-lived spike.
During the earlier 2026 crude surge, OIH had outpaced XOP, gaining 35% versus 22% while WTI moved above $100, illustrating the potential leverage to a sustained drilling cycle.
That makes the strategy straightforward: USO is the crude-price trade, XOP is the producer-leverage trade, and OIH is the capex-cycle trade.
If Hormuz tensions keep oil above $85, the next phase of the energy rally could depend less on the initial geopolitical shock and more on whether elevated crude prices become the new normal.
What's Next
Iran says the Strait of Hormuz will remain closed until Washington meets conditions tied to a June interim deal, Reuters reported.
Despite Trump's boasting that the strategic waterway is "new US territory," the U.S. Defense Department is evaluating a smaller military footprint in the Middle East following heavy strike damage to Persian Gulf bases, according to the Washington Post.
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