The Energy sector has had a rollercoaster of a year so far in 2026. Unsurprisingly, investor sentiment has swung just as sharply.
With the latest leg of the rally, sentiment has become extremely bullish once again.
And Energy is not just popular in absolute terms. It is also one of the most popular equity sectors and ranks highly across the broader asset universe we track, just behind Tech.
Our Sentiment Matters Aggregate (SMA) for Energy has risen to the 85th percentile.
Over the past year, Energy sentiment has swung from one extreme to another: from extreme bearishness in sell-side and buy-side Outlooks for 2026, to extreme bullishness after the war with Iran began, back to neutral, and now towards extreme bullishness once again.
The underlying narratives have shifted just as dramatically: from concerns about oversupply to major supply disruptions, then the prospect of supply returning following a ceasefire. Now, with the conflict escalating again, the supply-risk narrative is firmly back.
Could we be approaching another turning point?
The point of this note is not to call the exact top in Energy.
We may not be there. Our SMA could rise further. The March/April peak was higher, after all. And momentum remains strong, with no signs of a turn yet.
The point is to do what sentiment analysis is good at:
- Spot when the hurdle for further upside is rising — and when the market becomes more vulnerable to "less good" news.
- Identify the prevailing narrative and stress-test it — what is already priced, where is consensus most confident, and what could realistically force a rethink?
Sentiment does matter
One could be tempted to assume that Energy sector performance is simply a function of the oil price. But there are two problems with that.
First, Energy equities and oil prices do not always move together.
There have been several periods over the past decade or so when their performance has diverged significantly, sometimes for years. In 2013, Energy equities gained while oil prices were broadly flat. Between 2017 and 2020, the sector struggled to keep up with oil prices, even during periods of recovery.
Oil prices matter, of course. But so do earnings expectations, valuations, capital discipline, shareholder distributions and broader investor appetite for the sector.
Second, predicting the oil price is hardly easier than predicting Energy equities. Replacing one difficult forecasting problem with another doesn't really help.
That is why we look at sentiment towards Energy equities directly.
It helps us understand what investors are already expecting, how much optimism or pessimism is reflected in the sector, and whether the balance of risks is shifting — without needing to make a precise forecast for oil prices.
Sentiment & Positioning
We always start with the data.
Energy sector sentiment has improved sharply alongside outperformance.
That part is not unusual. Price and sentiment often move together.
What stands out more is the level.
At the 85th percentile, our Energy SMA is approaching genuine bullish extremes, marking a sharp reversal over the past year.