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Here's Why Energy ETFs Outperformed Last Week: Will the Rally Last?
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The energy sector outperformed last week, buoyed by a rise in crude oil prices, triggered by an escalation in the Middle East tensions. Energy Select Sector SPDR Fund (XLE - Free Report) has gained 5.8%, outperforming the broad market index fund (SPY - Free Report) , which has gained 1.8%.
Most energy ETFs rallied last week, with VanEck Vectors Oil Services ETF (OIH - Free Report) , SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report) , Invesco Energy Exploration & Production ETF (PXE - Free Report) , Invesco S&P SmallCap Energy ETF (PSCE - Free Report) and SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) leading the way. These funds gained nearly 8% last week.
Oil prices soared to the highest level since February after Israel launched a wave of airstrikes against Iran’s nuclear and ballistic missile programs as well as its senior military leadership, escalating concerns about broader supply disruptions in the Middle East. In response, Iranian missiles reportedly struck a major oil refinery in Haifa, Israel, causing significant damage (read: Oil ETFs Jump on Escalation in Middle East Tensions).
Oil price jumped 13% last week, with more than 7% gains coming in just Friday. Currently, U.S. crude oil is priced at $75.67 per barrel while Brent is hovering at $77.90 per barrel.
Will the Rally Continue?
Iran has hinted at potentially closing the Strait of Hormuz, a strategic chokepoint through which about 20% of the world’s oil passes en route to international markets. Analysts at Goldman Sachs warned that such a move could push oil prices above $100 per barrel. Other analysts also warn that if the conflict drags on or draws in other regional powers, crude prices could breach the $100 mark.
The oil rally could extend further if the European Union advances its plan for a fresh round of sanctions on Russian energy exports. This is especially true as the European Commission last week proposed a new sanctions package that involves lowering the oil price cap on Russian crude from $60 to $45 per barrel, banning use of the Nord Stream pipeline and blacklisting 77 additional “shadow fleet” vessels transporting sanctioned oil.
Meanwhile, the Energy Information Administration (EIA) slashed its U.S. crude oil production estimates by 50,000 barrels for 2026 to 13.37 million barrels per day. This would be the first decline on an annual basis in U.S. output since 2021. The EIA left projected output growth for 2025 unchanged at 210,000 barrels per day.
On the other hand, the oil cartel, OPEC+, agreed to increase oil output by 411,000 barrels a day in July. By the end of July, over 60% of the bloc’s planned 2.2 million bpd increase will have been implemented.
Further, President Donald Trump expressed displeasure over rising oil prices, urging domestic producers to ramp up drilling and floated the idea of additional sanctions on Russia unless it moves to de-escalate its war on Ukraine (read: Country ETFs to Gain/Lose on Oil Price Rebound).
VanEck Vectors Oil Services ETF tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. It holds 26 stocks in its basket. With an AUM of $1 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees and trades in an average daily volume of 541,000 shares. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
SPDR S&P Oil & Gas Equipment & Services ETF tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. It holds 33 stocks in its basket with AUM of $157.7 million. SPDR S&P Oil & Gas Equipment & Services ETF charges 32 bps in fees per year from investors and trades in an average daily volume of 50,000 shares. It has a Zacks ETF Rank #3.
Invesco Energy Exploration & Production ETF (PXE - Free Report)
Invesco Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holding 32 stocks in its basket, Invesco Energy Exploration & Production ETF has amassed $75.4 million in its asset base and charges 63 bps in annual fees. It trades in a volume of 26,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Invesco S&P SmallCap Energy ETF offers exposure to companies that are principally engaged in producing, distributing or servicing energy-related products, including oil and gas exploration, and production, refining, oil services and pipelines. It tracks the S&P Small Cap 600 Capped Energy Index, holding 32 stocks in its basket with a modest concentration across firms. Invesco S&P SmallCap Energy ETF has accumulated $61.4 million in its asset base and charges 29 bps in annual fees. It trades in an average daily volume of 14,000 shares and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report)
SPDR S&P Oil & Gas Exploration & Production ETF provides exposure to 53 oil and gas exploration and production companies by tracking the S&P Oil & Gas Exploration & Production Select Industry Index. It has an AUM of $2.1 billion and trades in an average daily volume of 4 million shares. SPDR S&P Oil & Gas Exploration & Production ETF charges 35 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
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Here's Why Energy ETFs Outperformed Last Week: Will the Rally Last?
The energy sector outperformed last week, buoyed by a rise in crude oil prices, triggered by an escalation in the Middle East tensions. Energy Select Sector SPDR Fund (XLE - Free Report) has gained 5.8%, outperforming the broad market index fund (SPY - Free Report) , which has gained 1.8%.
Most energy ETFs rallied last week, with VanEck Vectors Oil Services ETF (OIH - Free Report) , SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report) , Invesco Energy Exploration & Production ETF (PXE - Free Report) , Invesco S&P SmallCap Energy ETF (PSCE - Free Report) and SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) leading the way. These funds gained nearly 8% last week.
Oil prices soared to the highest level since February after Israel launched a wave of airstrikes against Iran’s nuclear and ballistic missile programs as well as its senior military leadership, escalating concerns about broader supply disruptions in the Middle East. In response, Iranian missiles reportedly struck a major oil refinery in Haifa, Israel, causing significant damage (read: Oil ETFs Jump on Escalation in Middle East Tensions).
Oil price jumped 13% last week, with more than 7% gains coming in just Friday. Currently, U.S. crude oil is priced at $75.67 per barrel while Brent is hovering at $77.90 per barrel.
Will the Rally Continue?
Iran has hinted at potentially closing the Strait of Hormuz, a strategic chokepoint through which about 20% of the world’s oil passes en route to international markets. Analysts at Goldman Sachs warned that such a move could push oil prices above $100 per barrel. Other analysts also warn that if the conflict drags on or draws in other regional powers, crude prices could breach the $100 mark.
The oil rally could extend further if the European Union advances its plan for a fresh round of sanctions on Russian energy exports. This is especially true as the European Commission last week proposed a new sanctions package that involves lowering the oil price cap on Russian crude from $60 to $45 per barrel, banning use of the Nord Stream pipeline and blacklisting 77 additional “shadow fleet” vessels transporting sanctioned oil.
Meanwhile, the Energy Information Administration (EIA) slashed its U.S. crude oil production estimates by 50,000 barrels for 2026 to 13.37 million barrels per day. This would be the first decline on an annual basis in U.S. output since 2021. The EIA left projected output growth for 2025 unchanged at 210,000 barrels per day.
On the other hand, the oil cartel, OPEC+, agreed to increase oil output by 411,000 barrels a day in July. By the end of July, over 60% of the bloc’s planned 2.2 million bpd increase will have been implemented.
Further, President Donald Trump expressed displeasure over rising oil prices, urging domestic producers to ramp up drilling and floated the idea of additional sanctions on Russia unless it moves to de-escalate its war on Ukraine (read: Country ETFs to Gain/Lose on Oil Price Rebound).
Here, we have profiled the abovementioned ETFs:
VanEck Vectors Oil Services ETF (OIH - Free Report)
VanEck Vectors Oil Services ETF tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. It holds 26 stocks in its basket. With an AUM of $1 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees and trades in an average daily volume of 541,000 shares. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report)
SPDR S&P Oil & Gas Equipment & Services ETF tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. It holds 33 stocks in its basket with AUM of $157.7 million. SPDR S&P Oil & Gas Equipment & Services ETF charges 32 bps in fees per year from investors and trades in an average daily volume of 50,000 shares. It has a Zacks ETF Rank #3.
Invesco Energy Exploration & Production ETF (PXE - Free Report)
Invesco Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holding 32 stocks in its basket, Invesco Energy Exploration & Production ETF has amassed $75.4 million in its asset base and charges 63 bps in annual fees. It trades in a volume of 26,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report)
Invesco S&P SmallCap Energy ETF offers exposure to companies that are principally engaged in producing, distributing or servicing energy-related products, including oil and gas exploration, and production, refining, oil services and pipelines. It tracks the S&P Small Cap 600 Capped Energy Index, holding 32 stocks in its basket with a modest concentration across firms. Invesco S&P SmallCap Energy ETF has accumulated $61.4 million in its asset base and charges 29 bps in annual fees. It trades in an average daily volume of 14,000 shares and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report)
SPDR S&P Oil & Gas Exploration & Production ETF provides exposure to 53 oil and gas exploration and production companies by tracking the S&P Oil & Gas Exploration & Production Select Industry Index. It has an AUM of $2.1 billion and trades in an average daily volume of 4 million shares. SPDR S&P Oil & Gas Exploration & Production ETF charges 35 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.