Peace could spoil the party for Big Oil

Peace in the Middle East would be welcome news for everyone struggling with high energy costs. But for investors, an end to the Iran war could threaten one of 2026's most profitable trades.

Energy stocks are crushing the S&P 500

The Invesco S&P 500 Equal Weight Energy ETF (RSPG) has surged more than 49% this year, compared with a roughly 11% gain for the S&P 500, according to Investing.com.

RSPG is on track for its third-best annual return since 2006, trailing only 2021 (53.7%) and 2022 (52.2%). It's also heading for its sixth consecutive annual gain, its longest-ever winning streak.

The fund has climbed another 7.5% over the past two weeks, putting a new annual return record within reach.

Big Oil's windfall

The industry's windfall is already showing up in earnings. ExxonMobil reported $14.5 billion in second-quarter profits, more than double the $7.1 billion it earned a year earlier.

Chevron's quarterly earnings surged to $12.1 billion from $2.5 billion.

Exxon also expects higher refining margins to boost third-quarter downstream profits by $4.5 billion from the previous quarter.

Trump has pledged to refrain from strikes on Iran until after the midterms, if at all. But renewed military preparations have raised fears of another escalation.

And oil prices have already rebounded 65% from their July low.

📌 Bottom line: For passive index investors, a crash in energy stocks isn't a big deal because the energy sector makes up less than 4% of the S&P 500. But for investors who have piled into energy stocks, an Iran deal could become a problem.