The Zacks Energy sector is forecast to deliver 7.6% earnings growth in 2026 Q1, up from 0.9% a week earlier and a -1.9% decline expected at the start of January. For full-year 2026, the forecast is 16.3% growth, up from 10% a week earlier and 5.4% at the start of January.
Consensus earnings lines for 2024–2027 have risen, with 2026 estimates climbing faster than 2027. This aligns with futures pricing that points to current supply disruptions easing within weeks, with oil prices trending down over time after the conflict ends.
Energy Earnings Revisions And Futures Signals
Expected Energy sector earnings for 2026 Q1 are $28.5 billion, up from $26.8 billion a week ago. Full-year 2026 sector earnings are put at $127.2 billion, up from $120.2 billion last week.
Year to date, the Zacks Energy sector is up 29.4%, versus Zacks Tech down 6%, the S&P 500 down 4.1%, and the Russell 2000 up 1.2%. For 2026 Q1 overall, S&P 500 earnings are expected to rise 13.4% year on year on 9% higher revenues.
Since January 2026, Q1 earnings estimates have increased for 7 of 16 Zacks sectors. Cyclical sectors are projected to supply 43.2% of 2026 Q1 index earnings, with non-cyclical sectors at 56.8%.
The 2026 Q1 reporting period ramps up on 14 April with JPMorgan, Citigroup, and Wells Fargo. So far, 18 S&P 500 members have reported, with earnings up 80.4% on 16.6% higher revenues, 72.2% beating EPS forecasts and 83.3% beating revenue forecasts.
Given the sharp upward revisions in the energy sector’s earnings outlook, we should consider bullish positions in the near term. With WTI crude recently surpassing $110 a barrel due to increased tensions in the Strait of Hormuz over the past month, the momentum is clearly behind energy producers. This suggests looking at call options on major integrated oil companies and explorers heading into their Q1 reports.
Near Term Energy Options Positioning
The projection for Q1 earnings growth in the energy sector now stands at 7.6%, a significant jump from the negative expectations at the start of the year. This makes call options on the Energy Select Sector SPDR Fund (XLE) particularly interesting as a way to play the entire sector’s strength. We saw a similar pattern in early 2022, when geopolitical events caused a rapid repricing of energy assets, leading to significant gains for those positioned correctly.
However, this ongoing conflict has pushed implied volatility higher across the energy complex, making options more expensive. This environment could favor strategies that sell premium, such as writing covered calls on existing long stock positions to generate income. Traders could also consider bull put spreads to define risk while still maintaining a bullish outlook.
It is important to note that futures markets are suggesting the current high oil prices may not last, with contracts for later in the year trading at a lower price. For instance, the December 2026 WTI contract is currently priced around $95, a noticeable discount to the spot price. This could signal an opportunity to look at buying puts with longer-dated expirations to position for a potential price correction once the current supply fears ease.
The year-to-date performance shows energy stocks up nearly 30% while the technology sector is down, creating a stark divergence that presents a potential pairs trading opportunity. We could consider simultaneously buying call spreads on an energy ETF while buying put spreads on a technology-focused one like the QQQ. This strategy would capitalize on the continuation of this trend through the upcoming earnings season.
The Q1 earnings season, which kicks off with the big banks around April 14th, will be a major catalyst. We should monitor these initial reports closely as they will set the economic tone for the market. These results could either accelerate or temper the bullish sentiment in cyclical sectors like energy.
