Oil futures fell below $70 a barrel on Wednesday as diplomatic progress toward ending the 2026 U.S.-Iran conflict reduced the geopolitical risk premium that had driven prices higher. The decline reverses earlier spikes that had pushed crude well above $100 at the height of the crisis. Benchmark prices first fell below $81 before slipping under $70, supported by agreements to reopen the Strait of Hormuz. At the time of publication, WTI crude futures were down about 1.35% near $69.39 a barrel, while Brent crude futures fell approximately 1.67% to $72.52.

The drop in crude prices is raising questions about whether the sector's strong run can continue. Traditionally, falling oil prices weigh on energy producers by reducing revenue and profit expectations. However, energy stocks have shown surprising resilience, supported by disciplined capital spending and shareholder returns. For ETF investors, the key question is whether energy equities can continue outperforming if crude prices stay below the psychologically important $70 threshold.

Energy ETF Performance

The largest energy-focused fund, the Energy Select Sector SPDR Fund (NYSE: XLE), provides exposure to integrated oil giants such as Exxon Mobil Corp (NYSE: XOM) and Chevron Corp (NYSE: CVX). While these companies have diversified operations, prolonged weakness in crude prices could pressure earnings expectations. The fund has been down 9% in the past month.

Funds focused on exploration and production companies may be more vulnerable. The SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) holds independent oil producers whose profitability is more directly tied to commodity prices. This fund has been down more than 10% in the past month. Oil-services companies tracked by the VanEck Oil Services ETF (NYSE: OIH) have declined more than 14% in the past month, as lower oil prices can lead producers to trim spending plans.

Sector Resilience

Unlike previous downturns, many energy companies have prioritized profitability over production growth. Producers have focused on generating free cash flow, repurchasing shares and maintaining dividends. This shift has helped attract investors seeking value and income. Additionally, if lower gasoline prices boost consumer spending and support broader economic growth, energy demand may remain stronger than investors expect. Upcoming earnings reports will be critical for investors assessing if producers can sustain cash generation in a sub-$70 oil environment.

Air fares are unlikely to decrease significantly until September despite falling oil prices, according to GasBuddy analyst Patrick De Haan. He attributes this to airlines optimizing capacity for high fuel prices and summer demand, which limits immediate fare reductions. A full drop in fares is expected only when demand decreases later this year.

De Haan stated that airlines had trimmed capacity due to high fuel prices and the summer season. He expects only a few deals to appear on less utilized routes, rather than a broad reduction in fares. A significant decrease is anticipated when demand drops, likely in mid-to-late August, but more so in the fall when capacity will exceed demand.

Domestic vs. International Pricing

The analyst highlighted a disparity between domestic and international flight costs. He noted that it is currently cheaper to fly from Chicago’s O’Hare International Airport to Naples, Italy, than to fly from Newark to Florida. Prices for international flights to Italy from the U.S. have dropped from over $1200 to under $800.

Market Factors

Analysts suggest that strong demand provides operators with little incentive to lower prices. The recent collapse of Spirit Aviation Holdings Inc. in May also removed a source of cheaper tickets for flyers. Additionally, uncertainty around the Strait of Hormuz has contributed to rising shipping costs, with the market average cost of shipping a 40-ft container from the Far East to the U.S. West Coast recently at $4,047.

Current Energy Prices

Oil prices fell on Thursday, with West Texas Intermediate (WTI) crude oil dropping below $70 to 69.87/bbl. Brent crude oil also fell to $72.98/bbl. According to data from Airlines for America on June 24, jet fuel costs $2.83/gallon. Meanwhile, the national average for a gallon of gas was at $3.9180 on Thursday, with prices remaining above $5/gallon in states like California and Washington.