Energy Stocks Look Attractive on Soaring Oil: Top Trade Opportunities

The first quarter was quite eventful for Wall Street, but the war in Eastern Europe was clearly a standout. Geopolitical tensions rattled financial markets, weighed on equities, and sparked a commodity price shock after the United States and its allies imposed heavy economic costs on Russia for invading Ukraine.

Oil prices, already on an upswing on supply-demand imbalances, soared to triple digits, reaching levels not seen since 2008. That owed to a rising risk premium and disruptions in energy trade flows after major international buyers began to ostracize Russian crude to avoid becoming entangled in sanctions indirectly.

Predictably, energy stocks gained in oil’s slipstream, building on the strong rally that began last year. Against this backdrop, the Energy Select Sector SPDR Fund (XLE) and SPDR S&P Oil & Gas Exploration & Production (XOP) ETFs surged more than 40% year-to-date. After this remarkable run, it's natural to wonder whether the energy sector's strong performance will continue in the months ahead. I am inclined to think it will, which is why I maintain a constructive view on the energy complex.