U.S. crude prices have risen above $85 a barrel, marking their highest level since late July, as the broader energy sector emerges as one of the top-performing market sectors in 2026 with a 40% year-to-date gain. Brent crude is trading above $91 per barrel, having risen for a third straight session. The price surge follows disruptions to oil logistics in the Strait of Hormuz due to the ongoing U.S.-Iran war.

The rally has delivered significant returns for major industry players. The eight largest oil companies recently reported more than $90 billion in combined Q2 profits. This performance aligns with policy promises made during the 2024 campaign trail, where then-candidate Donald Trump sought $1 billion from executives at Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), Continental Resources, EQT (NYSE: EQT), Cheniere Energy (NYSE: LNG), and the American Petroleum Institute.

What the Numbers Show

The divergence in performance between different energy investment vehicles highlights distinct drivers within the sector. While the Energy Select Sector SPDR ETF (NYSE: XLE) gained roughly 41% year to date, the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) outperformed with a gain of more than 45%. This suggests that smaller exploration and production companies, which carry greater weight in the equal-weighted XOP fund, have benefited disproportionately from sustained crude strength compared to large-cap integrated companies represented in XLE.

ETF Strategies for Current Market Conditions

Investors are deploying three primary exchange-traded funds to navigate the current geopolitical landscape:

• United States Oil Fund (NYSE: USO): This fund serves as a direct tactical vehicle for expressing views on crude prices through futures. It does not own oil companies but tracks movements in crude futures. The current market structure is favorable for USO because crude is in backwardation, allowing the fund to benefit from positive roll yield rather than suffering the drag associated with contango markets. On July 29, when WTI jumped 6.7% to $84.56, USO surged 6.4% in premarket trading, compared with a 2.2% gain for XLE.

• SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP): Offering higher beta exposure to sustained crude strength, XOP is tilted toward exploration and production companies. Its equal-weighted structure gives smaller producers greater influence than they hold in large-cap funds. However, its performance can be dampened by production costs, capital spending, and company-specific earnings, which may dilute or amplify the impact of crude price movements.

• VanEck Oil Services ETF (NYSE: OIH): This fund provides a second-order play on the energy cycle, benefiting when higher crude prices encourage producers to increase drilling and capital expenditure. During an earlier crude surge in 2026, OIH outpaced XOP, gaining 35% versus 22% while WTI moved above $100. This illustrates the potential leverage to a sustained drilling cycle, making it a longer-term bet on persistent Hormuz tensions rather than short-lived spikes.

Geopolitical Outlook

The trajectory of oil prices remains tied to developments in the Middle East. Iran has stated that the Strait of Hormuz will remain closed until Washington meets conditions tied to a June interim deal. Despite assertions that the strategic waterway is "new US territory," the U.S. Defense Department is evaluating a smaller military footprint in the region following heavy strike damage to Persian Gulf bases.

Maritime data analytics firm Kpler reported a sharp decline in shipping activity through the Strait of Hormuz last week, with confirmed crossings falling 19.5% to 95. The reduction in traffic was particularly pronounced towards the end of the period, with only three vessels crossing on August 16.

What the Numbers Show

The data highlights a notable divergence between weekly aggregate volume and daily throughput. While the total of 95 crossings represents a 19.5% decline from the prior period, the activity level on August 16 dropped to just three confirmed crossings. This suggests that the weekly decline may have been driven by a severe bottleneck or cessation of movement in the final days of the reporting window, rather than a uniform reduction across all seven days.