The Middle East conflict and the AI data center boom have jointly propelled the energy sector to outperform the broader market with a record 36.5% gain.
2026-04-02 11:38:04
Energy investors, long under pressure, are finally seeing smiles again. Driven by a combination of factors, including the ongoing Middle East conflict, a surge in electricity and natural gas demand fueled by the artificial intelligence boom, and continued rotation of funds from overvalued tech stocks, the energy sector is significantly outperforming the overall market by its most pronounced margin ever.
The energy sector has achieved a 14-week winning streak, a record far exceeding any previous bull market performance, even surpassing the nine-week winning streak that occurred in 2007 when oil prices surged by nearly 50% due to the Middle East conflict. As of now, the S&P 500 energy sector has a year-to-date return of 36.5%, while the S&P 500 index has fallen by 4.6% over the same period.
Oil and gas stocks not only easily outperformed the previously high-flying technology sector (down 10.0%), but also significantly outperformed traditional defensive sectors, with utilities rising 7.5%, consumer staples rising 7.0%, and healthcare falling 5.3%.
In this round of price increases, US oil giants have performed particularly well: Exxon Mobil has returned 33.1% year-to-date; Chevron Corp. has risen 28.5%; Occidental Petroleum has surged 49.6%; ConocoPhillips has risen 35.8%; and Marathon Petroleum has risen 43.8%.
European oil and gas giants are also keeping pace: Equinor ASA, the Norwegian state-owned oil company, has seen a year-to-date return of 69.2%, leading the European market; Eni SpA has risen 43.9%; TotalEnergies has increased 36.5%; BP Plc. has risen 31.8%; and Shell Plc. has also recorded a 24.3% increase.
This strong performance in the energy sector is not a flash in the pan. Multiple Wall Street institutions predict that oil prices are likely to remain high for an extended period. Standard Chartered estimates that the Middle East conflict has led to a reduction in global oil supply of 7.4 million to 8.2 million barrels per day, with Iraqi production falling by 2.9 million barrels per day, Saudi Arabia by 2 million to 2.5 million barrels per day, the UAE by 0.5 million to 0.8 million barrels per day, Qatar and Kuwait by 0.5 million barrels per day each, and Iran's production also decreasing by approximately 1 million barrels per day compared to pre-conflict levels.
More importantly, all oil exports that could bypass the Strait of Hormuz have already been diverted. Unless the blockade is eased, global oil supply is unlikely to recover significantly in the short term.
Saudi Arabia is currently using the temporary additional capacity of the East-West pipeline to increase its shipments to the Red Sea to 7 million barrels per day.
Meanwhile, the disruption of tanker traffic in the Strait of Hormuz has cut off approximately 20% of the global liquefied natural gas (LNG) supply. This event exposed the structural fragility of the Gulf region's energy supply, particularly since almost all of Qatar's LNG exports pass through this narrow maritime chokepoint. The lack of short-term alternatives has led to significantly increased volatility in the natural gas market. Major Asian LNG importers are actively adjusting their power generation structures, shifting towards coal and nuclear power to reduce their dependence on the volatile spot market and ensure energy security.
Unlike previous oil price boom cycles, oil and gas companies have generally maintained strict capital discipline and high free cash flow yields, which has made them more resilient to market fluctuations.
The energy sector has fundamentally shifted from pursuing rapid production expansion to prioritizing shareholder returns and a healthy balance sheet. This strategy allows companies to better self-finance and maintain robust operations during periods of volatile oil prices.
The rapid expansion of artificial intelligence data centers is becoming a new core driving force in the energy industry.
Global data center electricity consumption is projected to more than double by 2030, growing at more than four times the rate of electricity demand growth across all other sectors. In the United States, electricity demand for artificial intelligence data centers could surge from 4 gigawatts in 2024 to 123 gigawatts by 2035, an increase of more than thirty times. These data centers are transforming into gigawatt-scale "power plants" because GPUs require high-intensity power around the clock.
The artificial intelligence boom is also bringing significant benefits to renewable energy producers. The iShares Global Clean Energy ETF (ICLN) has risen 11.1% year-to-date and has gained 58.8% over the past 52 weeks. Tech giants such as Microsoft, Amazon, and Google are providing renewable energy companies with stable income guarantees of up to 25 years by signing large-scale, long-term power purchase agreements.
The nuclear energy sector has performed particularly well. Nuclear energy is experiencing a resurgence due to its unique advantage of providing clean, stable, and high-density electricity 24 hours a day. This process is further accelerated by multiple factors, including government support, tight uranium supply, and direct investment in nuclear energy infrastructure by tech giants. The Global X Uranium ETF (URA) has risen 15.4% year-to-date and has accumulated a gain of 113.7% over the past year.
Driven by both the Middle East conflict pushing up oil prices and the explosive growth in demand for AI data centers, the energy sector has performed exceptionally well this year, significantly outperforming the broader market and tech stocks. Oil and gas companies have demonstrated strong resilience through strict capital discipline, while AI-related electricity demand is injecting new long-term growth momentum into the entire energy industry.
Despite ongoing geopolitical uncertainties, structural improvements in the energy sector and demand-side support suggest it is poised to maintain a relatively strong performance for some time to come.
Investors need to keep a close eye on oil price trends, the situation in the Strait of Hormuz, and the latest developments in the construction of artificial intelligence infrastructure in order to better seize investment opportunities in this round of energy market.
The energy sector has achieved a record 14-week winning streak, outperforming both the broader market and tech stocks.
The energy sector has achieved a 14-week winning streak, a record far exceeding any previous bull market performance, even surpassing the nine-week winning streak that occurred in 2007 when oil prices surged by nearly 50% due to the Middle East conflict. As of now, the S&P 500 energy sector has a year-to-date return of 36.5%, while the S&P 500 index has fallen by 4.6% over the same period.
Oil and gas stocks not only easily outperformed the previously high-flying technology sector (down 10.0%), but also significantly outperformed traditional defensive sectors, with utilities rising 7.5%, consumer staples rising 7.0%, and healthcare falling 5.3%.
US and European oil and gas giants experienced a collective surge, with many individual stocks seeing astonishing gains.
In this round of price increases, US oil giants have performed particularly well: Exxon Mobil has returned 33.1% year-to-date; Chevron Corp. has risen 28.5%; Occidental Petroleum has surged 49.6%; ConocoPhillips has risen 35.8%; and Marathon Petroleum has risen 43.8%.
European oil and gas giants are also keeping pace: Equinor ASA, the Norwegian state-owned oil company, has seen a year-to-date return of 69.2%, leading the European market; Eni SpA has risen 43.9%; TotalEnergies has increased 36.5%; BP Plc. has risen 31.8%; and Shell Plc. has also recorded a 24.3% increase.
Expectations of higher and longer-lasting oil prices are strengthening, with supply disruptions having far-reaching consequences.
This strong performance in the energy sector is not a flash in the pan. Multiple Wall Street institutions predict that oil prices are likely to remain high for an extended period. Standard Chartered estimates that the Middle East conflict has led to a reduction in global oil supply of 7.4 million to 8.2 million barrels per day, with Iraqi production falling by 2.9 million barrels per day, Saudi Arabia by 2 million to 2.5 million barrels per day, the UAE by 0.5 million to 0.8 million barrels per day, Qatar and Kuwait by 0.5 million barrels per day each, and Iran's production also decreasing by approximately 1 million barrels per day compared to pre-conflict levels.
More importantly, all oil exports that could bypass the Strait of Hormuz have already been diverted. Unless the blockade is eased, global oil supply is unlikely to recover significantly in the short term.
Saudi Arabia is currently using the temporary additional capacity of the East-West pipeline to increase its shipments to the Red Sea to 7 million barrels per day.
Meanwhile, the disruption of tanker traffic in the Strait of Hormuz has cut off approximately 20% of the global liquefied natural gas (LNG) supply. This event exposed the structural fragility of the Gulf region's energy supply, particularly since almost all of Qatar's LNG exports pass through this narrow maritime chokepoint. The lack of short-term alternatives has led to significantly increased volatility in the natural gas market. Major Asian LNG importers are actively adjusting their power generation structures, shifting towards coal and nuclear power to reduce their dependence on the volatile spot market and ensure energy security.
Capital discipline has been significantly improved, and the company's ability to withstand risks has been greatly enhanced.
Unlike previous oil price boom cycles, oil and gas companies have generally maintained strict capital discipline and high free cash flow yields, which has made them more resilient to market fluctuations.
The energy sector has fundamentally shifted from pursuing rapid production expansion to prioritizing shareholder returns and a healthy balance sheet. This strategy allows companies to better self-finance and maintain robust operations during periods of volatile oil prices.
The AI data center "supercycle" is coming, and nuclear and renewable energy will benefit simultaneously.
The rapid expansion of artificial intelligence data centers is becoming a new core driving force in the energy industry.
Global data center electricity consumption is projected to more than double by 2030, growing at more than four times the rate of electricity demand growth across all other sectors. In the United States, electricity demand for artificial intelligence data centers could surge from 4 gigawatts in 2024 to 123 gigawatts by 2035, an increase of more than thirty times. These data centers are transforming into gigawatt-scale "power plants" because GPUs require high-intensity power around the clock.
The artificial intelligence boom is also bringing significant benefits to renewable energy producers. The iShares Global Clean Energy ETF (ICLN) has risen 11.1% year-to-date and has gained 58.8% over the past 52 weeks. Tech giants such as Microsoft, Amazon, and Google are providing renewable energy companies with stable income guarantees of up to 25 years by signing large-scale, long-term power purchase agreements.
The nuclear energy sector has performed particularly well. Nuclear energy is experiencing a resurgence due to its unique advantage of providing clean, stable, and high-density electricity 24 hours a day. This process is further accelerated by multiple factors, including government support, tight uranium supply, and direct investment in nuclear energy infrastructure by tech giants. The Global X Uranium ETF (URA) has risen 15.4% year-to-date and has accumulated a gain of 113.7% over the past year.
Conclusion
Driven by both the Middle East conflict pushing up oil prices and the explosive growth in demand for AI data centers, the energy sector has performed exceptionally well this year, significantly outperforming the broader market and tech stocks. Oil and gas companies have demonstrated strong resilience through strict capital discipline, while AI-related electricity demand is injecting new long-term growth momentum into the entire energy industry.
Despite ongoing geopolitical uncertainties, structural improvements in the energy sector and demand-side support suggest it is poised to maintain a relatively strong performance for some time to come.
Investors need to keep a close eye on oil price trends, the situation in the Strait of Hormuz, and the latest developments in the construction of artificial intelligence infrastructure in order to better seize investment opportunities in this round of energy market.
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