Global uncertainty is has been roiling energy ETF returns in recent months.
Over the past three years, the top 20 energy ETFs have all delivered gains, but over the past year, amid heightened geopolitical upheaval, some have dipped into the red.
Because energy can be a choppy sector, some experts treat these ETFs as satellites around a broader core portfolio.
Dean Lyulkin, co-CEO of small-business financing firm Cardiff in San Diego, said he looks at energy as one sector within the S&P 500 — currently a relatively small slice of the benchmark — “and we’re not recommending overweighting it right now.” The Trump administration has made it clear it wants oil prices held steady or lower to help tame inflation, “and that simple policy stance carries a lot of weight for the next few years,” he said.
“What’s remarkable is that even with significant geopolitical instability in the Middle East and Europe, oil prices have barely moved — something that’s atypical in market history,” he said.
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This is an indication that supply and pricing dynamics are in a different place than in past crises, said Lyulkin.
“In our view, any global economic hiccup from here could push prices lower, so we’d rather keep energy at market weight as part of a diversified portfolio,” he said.
Staying diversified
Energy ETFs act as a strategic tool for capturing sector-specific growth while mitigating individual stock risk, said Igor Isaev, head of analytics at international brokerage Mind Money. Alternative energy ETFs, including solar, wind and nuclear, dominate due to policy tailwinds and decarbonization trends, while natural gas ETFs remain unpredictable but offer long-term inflation hedging, he said.
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Even though U.S. solar and wind power energy producers are leading the game, the relevant ETFs are limited, with Invesco Solar ETF (TAN) being the top one, said Isaev; the fund has broad exposure to subsectors including infrastructure and utilities.
“North America is a key growth driver for solar and wind, but political instability and regulatory shifts have dampened short-term returns,” he said.
For investors who want energy sector exposure, Lyulkin said he also typically recommends broad-based funds like XLE for large integrated oil companies and pairs it with VanEck Oil Services ETF (OIH) for targeted oilfield services exposure.
“That combination provides a balanced cross-section of the industry without making an outsized directional bet on oil prices,” he said.
Scroll down the slideshow below for the 20 ETFs with the highest three-year returns as of July 31, 2025. All data is from Morningstar Direct.
