XLE underperformed the S&P 500 by over 22 percentage points amid Iran conflict and supply chain disruptions in Q2 2026.
The energy sector (XLE) fell more than 9% in the second quarter of 2026, lagging the broader market’s 13% gain as geopolitical tensions disrupted supply chains. The Iran war and Strait of Hormuz blockade triggered sharp volatility, compounded by LNG infrastructure damage and OPEC+ policy shifts.
Top gainers included Targa Resources, Valero Energy, and Marathon Petroleum, while Occidental Petroleum, APA, and ConocoPhillips led declines. The sector’s underperformance reflected investor concerns over persistent supply risks and production uncertainties.
Market focus now shifts to potential resolutions for the Strait of Hormuz trade route and US-Iran conflict, alongside production updates from major fuel producers.