The energy sector is experiencing a sharp rebound following a significant escalation in Middle Eastern tensions after Iran launched a missile attack on Israel on October 1. While the immediate physical damage was minimal, the geopolitical consequences have been substantial, as fears of further conflict and disruptions to global crude oil supplies have escalated. With Iran being an essential oil supplier through the Strait of Hormuz, any prolonged conflict in the region could have severe consequences for global energy markets.

Oil Surges in Response to Conflict in the Middle East

In response to these tensions, oil prices surged. WTI crude oil rose by 2.44%, closing at $69.83 per barrel, while Brent crude saw a 2.6% increase, settling at $73.56 per barrel. These price hikes reflect growing concerns that further conflict in the Middle East could disrupt oil supplies, mainly if retaliatory strikes target Iranian oil infrastructure. 

The energy sector followed suit, with the Energy Select Sector SPDR Fund (NYSE: XLE) surging 4.08% for the week as it broke out of a recent downtrend and pushed above its critical moving averages. This newfound momentum has positioned energy stocks as attractive plays for investors looking to capitalize on the rising oil prices.

With oil prices and energy stocks gaining momentum, now may be an opportune time to gain exposure to the sector. Here are three energy stocks that have demonstrated strong relative strength amid this week's surge in oil prices.

Technical Breakout Positions Exxon Mobil as a Top Energy Stock

Exxon Mobil (NYSE: XOM), the largest oil company in the U.S. and the largest holding in the XLE ETF, boasts a market capitalization of $479 billion. The stock rose an impressive 5.8% this week, breaking out of a prolonged consolidation phase. It is now just 1.8% away from its 52-week high.

As one of the biggest beneficiaries of rising oil prices, Exxon Mobil can see significant revenue growth if crude supply is disrupted, primarily through its extensive upstream business, which relies heavily on oil production.

Exxon Mobil’s vast global footprint also hedges against regional supply risks, allowing the company to maintain production levels despite geopolitical instability. With a 3.13% dividend yield, Exxon Mobil provides income-oriented investors with a reliable payout while offering upside from rising oil prices. From a technical perspective, the recent breakout above consolidation levels signals a bullish trend, making it a compelling option for investors seeking exposure to the energy sector.

Hess Corporation Rallies 6%, Leveraging Geographic Diversification

Hess Corporation (NYSE: HES), though smaller than ExxonMobil with a market capitalization of $43 billion, has been one of the best-performing energy stocks this week, surging over 6% since the escalation in Middle Eastern tensions.

The company operates in two segments: Exploration and Production and Midstream, focusing on crude oil, natural gas liquids (NGLs), and natural gas production.

Unlike some competitors, Hess is less exposed to the Middle East, with its critical operations in the U.S., Guyana, and the Gulf of Mexico. This geographic diversification helps insulate Hess from the immediate geopolitical risks in the region, allowing the company to benefit from rising oil prices without the same level of supply disruption risk.

XLE ETF Signals Bullish Trend, Providing Diversified Energy Exposure

The XLE ETF (NYSE: XLE) is a top choice for investors seeking broad exposure to the energy sector. The ETF, which tracks the performance of the Energy Select Sector Index, includes holdings in some of the largest U.S.-listed energy companies, such as ExxonMobil, Chevron, and ConocoPhillips. The XLE is up 8.2% year-to-date and broke through a critical resistance level at $90 earlier this week, signaling a bullish trend.

With a 3.55% dividend yield and a low expense ratio of 0.09%, XLE provides investors with an attractive income stream while offering diversification across the energy sector. The ETF’s holdings cover various energy sub-industries, including oil, gas, and energy equipment and services. This makes it a more diversified way to gain exposure to the sector than individual stock picking. 

Analysts currently have a Moderate Buy rating on the ETF, with a consensus price target suggesting a 16.29% upside. This makes XLE a compelling option for investors looking for broad energy exposure while minimizing the risks of investing in individual stocks.