Zacks expects the Energy sector to post 7.6% earnings growth in 2026 Q1. This is up from 0.9% a week earlier and from a -1.9% estimate at the start of January.
For full-year 2026, Energy earnings are forecast to rise 16.3%. This compares with 10% a week ago and 5.4% at the start of January.
Energy Estimates Turn Up Sharply
The upturn in 2026 estimates is sharper than for 2027, based on expectations that current oil-price spikes ease over time. Energy has a smaller weight in the S&P 500 than in past years, by market value and earnings share.
Energy sector Q1 earnings are projected at $28.5 billion, up from $26.8 billion a week ago. Full-year 2026 sector earnings are projected 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, S&P 500 earnings are expected to grow 13.4% year on year on 9% higher revenues. Since early January 2026, Q1 earnings estimates have risen for 7 of 16 Zacks sectors.
Positioning Around Earnings Season
Cyclical sectors are forecast to produce 43.2% of 2026 Q1 S&P 500 earnings, with non-cyclical sectors at 56.8%. The season accelerates on 14 April as JPMorgan, Citigroup, and Wells Fargo report.
So far, 18 S&P 500 firms have reported, with earnings up 80.4% on 16.6% higher revenues. Of these, 72.2% beat EPS estimates and 83.3% beat revenue estimates.
Given the sharp upward revisions to Q1 2026 energy sector earnings, our immediate focus should be on bullish strategies. With WTI crude recently touching $110 a barrel amid ongoing tensions in the Strait of Hormuz, we see continued upward momentum for energy stocks. We should consider buying near-term call options on major producers and energy ETFs to capitalize on the run-up into the mid-April earnings reports.
The market has reacted strongly, pushing the energy sector up over 29% year-to-date while the broader S&P 500 has fallen. This clear rotation suggests a pairs trading strategy could be effective. We could structure this by going long on an energy basket while simultaneously shorting futures on the S&P 500 or Nasdaq, which is sensitive to the high energy costs that can pressure other sectors.
However, futures markets are pricing in an eventual easing of oil prices, suggesting the current spike is not permanent. Therefore, while we maintain a bullish stance for the coming weeks, we should also look at purchasing longer-dated puts, perhaps for the third quarter, to hedge against a sudden de-escalation of the conflict. This is a lesson we learned from the volatility spike in 2022, when energy prices eventually retreated from their highs.
The latest EIA report, showing a larger-than-expected crude inventory draw, further supports the short-term supply crunch narrative. This fundamental data strengthens the case for holding bullish derivative positions through the upcoming earnings announcements. The current market volatility, with the VIX hovering near 28, also makes options strategies that benefit from large price swings particularly relevant.
As the earnings season begins in earnest with the big banks on April 14th, their commentary will be critical. We will be listening for their outlook on loan provisions for the energy sector and their assessment of how sustained high prices could impact consumer spending. Their reports will provide the first major data points to either validate or challenge the market’s strong earnings growth expectations for the whole economy.
