Energy ETFs Climb as Oil Shock Keeps Markets Volatile
Canadian energy ETFs extended their rally last week as oil prices remained above $100 and supply risks in the Strait of Hormuz continued to dominate markets.
Oil Markets Continue to Drive Global Sentiment
Energy markets remained at the center of investor attention last week as the fallout from the Iran conflict continued to disrupt global oil flows and reshape macro expectations.
Crude prices stayed elevated after renewed tensions emerged around the Strait of Hormuz, where shipping activity remains heavily constrained. Reports that a tanker had been struck near the waterway reignited fears that supply disruptions could persist longer than initially expected, pushing WTI crude back above $102 per barrel while Brent approached $109.
The latest developments came shortly after President Donald Trump unveiled “Project Freedom,” a US-led initiative aimed at guiding civilian ships through the contested strait. Iran responded by warning that foreign military involvement would face retaliation and advised commercial vessels not to transit without coordination from its forces.
Markets continue to view the Strait of Hormuz as the key pressure point in the conflict. Roughly one-fifth of global oil trade normally passes through the corridor, meaning any prolonged disruption has immediate consequences for energy pricing, inflation expectations and global growth forecasts.
Although ceasefire discussions between Washington and Tehran briefly eased tensions earlier in the week, investors remain skeptical that a durable agreement is close. Oil prices have now surged nearly 60% since the conflict began in late February, intensifying concerns that higher energy costs could keep inflation elevated across developed economies.
OPEC+ Fractures Add to Supply Uncertainty
At the same time, supply-side uncertainty has deepened following the United Arab Emirates’ abrupt departure from OPEC+.
The cartel announced another modest production increase for June, but markets largely dismissed the move as symbolic given the scale of disruptions already affecting global supply. Analysts increasingly see the UAE’s exit as a sign of weakening cohesion within OPEC+, particularly as member states pursue diverging geopolitical and economic interests.
Tightening inventory data has reinforced the bullish backdrop. US crude stockpiles continued to decline while exports climbed to record highs, underscoring the strain on global energy markets as refiners and importers compete for available barrels.
For Canada’s energy sector, the environment remains broadly supportive. Elevated crude prices continue to improve profitability expectations for producers, while Canadian oil and gas equities have benefited from renewed investor interest in commodity-linked assets.
Canadian Energy ETFs Extend Their Outperformance
Canadian-listed energy ETFs reflected the strength in oil markets last week, with the broader energy category gaining 7.26% week-over-week and more than 40% year-to-date.
The largest product in the segment, the iShares S&P/TSX Capped Energy Index ETF (XEG), rose 6.94% during the week and remains up more than 42% in 2026. Despite significant weekly outflows exceeding $200 million, the fund continues to hold positive year-to-date inflows, suggesting some investors are taking profits after the sector’s strong run.
Active management strategies also benefited from the rally. The Ninepoint Energy Fund (NNRG) gained 8.13% during the week, making it one of the strongest-performing Canadian energy funds this year with returns above 44%.
Equal-weight oil and gas strategies posted similarly strong gains. The BMO Equal Weight Oil & Gas Index ETF (ZEO) advanced 7.84%, while the Global X Equal Weight Canadian Oil & Gas Index ETF (NRGY) climbed 7.80% as investors maintained exposure to upstream producers expected to benefit from sustained high crude prices.
Commodity-linked exposure also remained resilient. The Global X Crude Oil ETF (HUC) rose 2.65% during the week and is now up nearly 40% year-to-date, reflecting continued strength in front-month oil futures despite growing market volatility.
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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
