Energy stocks have made a strong start to 2025, outperforming the broader S&P 500 for the first time in years, with a more-than-5% gain year-to-date. This marks a stark contrast to the performance of the S&P 500, which has declined by 1% so far in 2025.
The sector’s growth has been largely driven by a resurgence in natural gas prices, which have bounced back from historic lows, propelling companies like Antero Resources and EQT to significant gains. As a result, the energy sector has emerged as the best-performing group of 2025.
This turnaround follows a tough couple of years for the energy industry, which saw losses of 1.3% in 2023 and a modest 5.7% gain in 2024, while the S&P 500 enjoyed nearly a 50% rally during the same period. Despite the impressive performance so far this year, energy stocks have yet to gain widespread confidence on Wall Street.
The recent gains can be attributed to a combination of factors. Oil and gas prices have been buoyed by the arrival of cold weather in the United States, pushing natural gas prices higher. At the same time, the Biden administration’s sanctions on Russia’s oil industry have added upward pressure on prices, with Brent crude climbing 4% to surpass $80 per barrel after the latest round of sanctions.
However, not all analysts are optimistic about the sector’s future performance. Bank of America analysts are cautious about the medium-term outlook for oil prices, noting that OPEC’s decision to delay its planned 2 million barrels per day production hike until 2025 could weigh on prices. They predict that any attempt to raise production could result in a drop in prices below $60 per barrel.
Similarly, analysts at JPMorgan and Citi have downgraded their expectations for Brent crude, forecasting a decline to around $70 per barrel in the coming quarter. RBC Capital Markets also downgraded the energy sector, citing concerns about weak earnings revisions and ongoing challenges related to fund flows.
On a global scale, RBC analysts highlighted energy policy, production, and sanctions as key issues impacting the sector, surpassing concerns about tax policy, regulation, and China’s economic stimulus measures.
Despite these headwinds, BMO Capital Markets has struck a somewhat more optimistic tone, calling the sector’s outlook “improving, albeit uncertain,” as it heads into the fourth-quarter earnings season. BMO sees potential for the energy sector to benefit from strong medium- to long-term demand, especially driven by the need for energy to power artificial intelligence (AI) data centers.
Meanwhile, nuclear stocks have also been buoyed by the growing demand for power to support AI infrastructure, with companies like Constellation Energy and Vistra Corp seeing double-digit gains in their shares this year.
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