The energy sector has kicked off 2026 with a level of momentum that few anticipated just a couple months ago.
As of February 10, energy has cemented its position as the best-performing sector in the S&P 500 year to date. The Energy Select Sector Index (IXE) posted an impressive gain of 19.8% on a total-return basis compared to the overall index’s 1.5% return. A surprising and sustained strength in oil prices is driving this performance.
The narrative is a sharp pivot from the close of 2025. WTI crude ended last year at $57 per barrel (bbl), a price point that largely reflected the prevailing bearish sentiment. Analysts were cautious on oil for some time, given oversupply concerns from lackluster demand growth and OPEC+ production cut unwinds (read more). However, prices surged throughout January and into February. They closed above $65/bbl on rising tensions with Iran and concerns around the Strait of Hormuz, which is a major route for oil flows.
This price action represents significant upside against professional forecasts. The consensus for Q1 was pegged at $57/barrel at the end of last year. However, current spot prices consistently holding in the $60s demonstrate that commodity price has been much more robust than expected.
The strength in oil prices and energy sentiment has been supportive for energy infrastructure, complementing tailwinds from notable dividend increases in recent weeks.
Energy Sector Strength Translates to Midstream Gains
Midstream ETFs, such as the Alerian MLP ETF (AMLP ) and the Alerian Energy Infrastructure ETF (ENFR ), are handily outperforming the S&P 500 in 2026. Year-to-date through February 10, AMLP’s underlying index, the Alerian MLP Infrastructure Index (AMZI), has gained 10.8% on a total-return basis. Meanwhile, ENFR’s underlying index, the Alerian Midstream Energy Select Index (AMEI), has gained 11.7% on a total-return basis.
Midstream’s fee-based business models provide less exposure to oil and gas prices, resulting in stable cash flows. These stable cash flows support generous and growing dividends. As of February 10, AMZI and AMEI were yielding 7.4% and 5.1%, respectively. Midstream is uniquely positioned to offer compelling income alongside less volatile energy exposure.
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