After significantly underperforming the market 2025, the energy sector is leading the way in 2026, with the Energy Select Sector SPDR ETF (NYSE:XLE) up more than 20% year to date (YTD).
This momentum is taking center stage following the outbreak of war in Iran, but the swing started at the end of last year.
A combination of geopolitical catalysts, booming demand for AI infrastructure, and good old-fashioned mean reversion are major driving factors, and this rally likely has room to run, given our ever-expanding energy demands.
Today, we'll look at five energy sector stocks across a diversified spectrum of oil and gas industries that could be portfolio leaders for the rest of the year (and potentially beyond).
Cheniere Energy Inc.
Cheniere (NYSE:LNG) is the largest liquified natural gas (LNG) exporter in the United States, averaging more than $20 billion in annual sales from the lucrative Corpus Christi and Sabine Pass LNG terminals. The company's revenue has accelerated over the last 12 months, and the $5.45 billion generated in Q4 2025 was the largest figure since Q1 2023.
LNG exports are expected to nearly double by 2030, and Cheniere is expanding its Corpus Christi location to facilitate increased production. Three different expansion projects are expected to be completed in 2026, 2028, and 2029, respectively. Cheniere announced record production levels in its Q4 2025 earnings report, and the revenue growth is likely sustainable since most of its contracts span at least 20 years.
The poor 2025 performance helped reset the company's valuation, which now sits at just 13.7 times earnings and 2.6 times sales. Investors began noticing the turnaround in December, and the stock quickly broke out above the 50-day and 200-day moving averages as Q1 2026 began.
While the fundamental and technical tailwinds remain strong, the stock has reached Overbought territory on the Relative Strength Index (RSI), and volatility is increasing. A pullback in the next few weeks might offer a better entry point for new investors, so a strategy that scales into a position might be prudent here.
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Diamondback Energy Inc.
Diamondback Energy (NASDAQ:FANG) is a large-cap Permian Basin operator with one of the most shareholder-friendly cost structures in the shale industry. The company generated more than $1.75 billion in free cash flow in Q3 2025 and returned nearly $900 million to shareholders through buybacks and dividends. Despite reporting a slight revenue miss in its Q4 release last week, Diamondback still received an array of price target upgrades from analysts, including a $218 target from Piper Sandler, representing a 23% gain from current levels.
FANG shares look undervalued at the moment, trading at just 11 times forward earnings with a 2.37% dividend yield and $8 billion in committed share repurchase agreements. After losing 15% in 2025, the stock is already up more than 12% so far in 2026, buoyed by a Golden Cross late last year that drove the share back above the 50-day moving average. Notably, the RSI continues to stay below the Overbought threshold of 70, which means the upward momentum likely isn't finished yet.
Exxon Mobil Corp.
The largest oil and gas company in the U.S. finally makes an appearance here with an attractive valuation despite nearing 52-week highs. ExxonMobil (NYSE:XOM) produced 4.7 million barrels of oil (and equivalents) per day in 2025, its highest output in more than four decades. Full-year 2025 earnings of $28.8 billion exceeded expectations, and the company has now posted top and bottom line beats in three consecutive earnings reports.
ExxonMobil also announced its 38th consecutive annual dividend increase and repurchases about $20 billion in shares each year. But despite this recent success, XOM shares still trade at just 22 times earnings, well below the industry average of 28.
XOM shares have surged more than 20% to start 2026, and the breakout has strong technical tailwinds behind it. After building strong support along the 50-day moving average to end 2025, the share price rallied out of a multi-year range, setting its first new all-time high since 2024. An overbought RSI broke the uptrend, but this reset could be the break new investors needed to get in.
The Williams Companies Inc.
The Williams Companies (NYSE:WMB) is a beneficiary of the AI data center boom, as hyperscalers account for the majority of its new infrastructure projects. Williams has inked more than $5 billion in data center deals, including the Socrates project for Meta, which is due for completion in the second half of 2026. The company reported 17% YOY revenue growth in Q4 2025, and raised its 2026 EBITDA guidance to $8.2 billion. It also has a new high price target; Morgan Stanley raised from $83 to $90 this week, representing potential upside of more than 15% from current prices.
Like many of its energy sector peers, 2025 was a rough year for WMB shares. A lost year ended with a four-month consolidation into a tight range, but that range finally broke earlier this year. The Moving Average Convergence Divergence (MACD) indicator hinted at a potential momentum shift when the two lines crossed the histogram, and now the stock is in a bullish uptrend, with the price well above its 50-day and 200-day moving averages.
EOG Resources Inc.
One of the OGs of the energy industry, EOG Resources (NYSE:EOG) is known for capital discipline, efficient operations, and access to some of the U.S.'s most premium basins. EOG is targeting $4.5 billion in free cash flow for 2026, with 22% net margin and a minuscule debt-to-equity ratio of 0.27. The stock trades at just 11 times forward earnings and yields a 3.2% dividend. EOG is one of the smoothest operators in oil and gas, with a commitment to returning value to shareholders. It's also finally showing technical trends to match the bullish fundamentals.
EOG hasn't made a new all-time high since 2022, but this could be the year that streak is finally broken if current trends continue. The stock broke out above the 50-day and 200-day moving averages in January, with a bullish MACD confirming the momentum shift. The RSI is also showing tremendous upward momentum, making EOG one of the breakout energy candidates for 2026.
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