Stacey Morris, head of energy research at VettaFi, joined Nate Geraci on this week’s ETF Prime to discuss energy ETFs amid the Iran conflict. Geopolitics currently dominates oil prices and energy stocks, though the sector posted strong gains before the war began, according to Morris.

Key Takeaways:

• Energy Select Sector SPDR ETF (XLE) up 25% before Iran strikes, peaked at 41%, now at 24%.
• The Strait of Hormuz carries 20% of global petroleum and LNG through critical chokepoint.
• Nuclear and coal ETFs gain as energy security becomes a long-term investment theme.

The Energy Select Sector SPDR ETF (XLE) was up 25% year-to-date before the initial strikes against Iran in late February, Morris said. The fund peaked in late March, at 41% year-to-date, before settling back to roughly 24% today. Energy attracted $4.5 billion in inflows during January and February, as investors rotated out of underperforming technology stocks.

Morris explained the significance of the Strait of Hormuz chokepoint. She noted that approximately 20% of global petroleum consumption and 20% of global liquified natural gas (LNG) supply passes through the strait. The industry has historically avoided closures, but the current situation represents a near worst-case scenario for supply disruptions, she said.

Oil Services Lead Gains

Sub-sectors posted divergent performance, with the VanEck Oil Services ETF (OIH) up over 40% year-to-date. Morris attributed the gains to recovery from earnings’ laggard status in 2024 and 2025, plus potential investment opportunities in Venezuela. The Alerian MLP ETF (AMLP) rose 11% in price and 13% on a total return basis year-to-date, with the underlying index yielding 7.2%.

Energy security emerged as a longer-term investment theme. The Range Nuclear Renaissance Index ETF (NUKZ) climbed 15% year-to-date, while the Range Global Coal Index ETF (COAL) attracted $60 million in inflows and gained nearly 10%, the discussion highlighted. Countries are refocusing on diversified energy sources and reliability amid geopolitical instability.

Ben Slavin, global head of ETFs at BNY Mellon, discussed structural innovations including 99 applications for ETF share classes, with 70 approved. He highlighted tokenization efforts and white space opportunities in digital assets, private assets, and thematic ETFs, noting that the Roundhill Memory ETF (DRAM) reached $1 billion within weeks of launch.