The 2025 Energy Resurgence: 3 ETFs to Watch Before the Year Ends

The energy sector in 2025 has been defined by a “return to fundamentals,” coupled with a massive surge in structural demand. After a period of significant price volatility in late 2024, the sector moderately stabilized in 2025, having gained 6.2% in the third quarter of 2025, compared with total return of 5.6% last year (as per Forbes). 

This growth was driven not only by traditional industrial needs but also by the “Age of Electricity” — the rapid electrification of the global economy.

For investors, this growth justifies a strong case for Energy exchange traded funds (ETFs). Rather than betting on a single driller or a lone solar startup, energy-focused ETFs allow participants to capture the broad-based recovery of the sector while mitigating the "binary risk" of individual stock failures. 

As we head into 2026, the spotlight is thus naturally on these funds because energy is no longer just a commodity play; it has become the critical bottleneck for the AI revolution and global data center expansion.

Now, before suggesting a few energy ETFs suitable for your watchlist, let us delve a bit deeper into what drove the sector and whether it is likely to continue rallying next year, to help you make a more informed decision.

Factors That Influenced the Energy Sector This Year

Several growth catalysts, mentioned below, wrote the storyline of the energy sector in 2025: 

•    The AI Power Crunch: Global data center investment is expected to reach an estimated $580 billion this year, according to the International Energy Agency’s (“IEA”) latest World Energy Outlook report. This "data is the new oil" narrative, backed by the ongoing AI revolution, shifted capital toward companies providing reliable, grid-stable power.

•    Steady Renewable Execution Amid a Shift in Focus: As the worldwide energy transition continued, global investment in new renewable energy development hit a record $386 billion in the first half of 2025 (as per BloombergNEF data). This represented a 10% year-on-year increase, driven by offshore wind and small-scale solar, but masked a shift away from utility-scale projects due to U.S. policy changes and grid saturation. 

•    Fossil Fuel Resilience: Despite the green transition, global oil demand growth rebounded to 920 kb/d in the third quarter of 2025 (as per IEA data), which more than doubled sequentially, as the macroeconomic picture broadly improved on easing trade tensions. This has kept major oil stocks like Exxon Mobil XOM and Shell Corp. SHEL buoyant on the bourses year to date.

As a result of the aforementioned factors, traditional integrated oil and gas companies and electric utilities have excelled this year, highlighted by their robust cash flows and their role as the “reliable backbone” of the energy sector, which cannot yet operate on renewables alone.

Outlook for 2026

As we enter 2026, the demand story appears increasingly anchored in electricity, thanks to the rapidly growing power-hungry data centers all over the world. To this end, the IEA expects data center power demand to more than double by 2030, with renewables and natural gas positioned to meet most of the rising power demand due to their cost-competitiveness in key markets (as cited in a S&P Global report). 

This dynamic favors companies exposed to natural gas production, flexible generation and grid connected infrastructure, alongside traditional integrated majors that are pivoting capital toward low carbon power assets. 

Meanwhile, nuclear has lately emerged as a primary beneficiary of the tech industry’s quest for 24/7, carbon-free baseload power. This positions companies involved in uranium, reactor services, and next-generation technology for solid growth in the near term. 

Against this evolving backdrop, a curated set of energy ETFs aligned with themes such as global energy, natural gas, nuclear power, and integrated oil and gas majors could serve as a timely watchlist as investors transition from 2025 into 2026.

Energy ETFs to Watch

Vanguard Energy ETF VDE

This fund, with assets worth $7.1 billion, offers exposure to 109 companies involved in the construction or provision of oil rigs, drilling equipment, and other energy-related service and equipment, or the exploration, production, marketing, refining, and/or transportation of oil and gas products. Its top three holdings include Exxon Mobil (22.02%), Chevron CVX (14.89%) and Conoco Phillips COP (5.56%). 

VDE has gained 4.1% year to date. The fund charges 9 basis points (bps) as fees. 

Fidelity MSCI Energy Index ETF FENY

This fund, with assets worth $1.3 billion, offers exposure to 102 companies involved in the energy sector. Its top three holdings include XOM (21.09%), CVX (15.04%) and COP (5.70%). 

FENY has risen 4.2% year to date. The fund charges 8 bps as fees.

State Street Energy Select Sector SPDR ETF XLE

This fund, with assets under management (AUM) worth $26.12 billion, offers exposure to 22 companies from the oil, gas and consumable fuel, energy equipment and services industries. Its top three holdings include XOM (23.57%), CVX (17.29%) and COP (7.07%). 

XLE has gained 4.8% year to date. The fund charges 8 bps as fees. 

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This article originally published on Zacks Investment Research (zacks.com).

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