The S&P 500 closed out 2025 with a total return of 16.4%, marking its third consecutive year of double-digit gains.
Despite a choppy finish, it was a strong year for equities, with every sector ending the year in positive territory. Growth-oriented sectors led the way, supported by a consumer that proved far more resilient than many expected. (All returns discussed are total returns and include dividends).
Technology once again topped the leaderboard, delivering a 24.6% return as investment in artificial intelligence, semiconductors, and cloud infrastructure continued at a rapid pace. Communication Services followed closely, up 23.1%, driven by strength in digital advertising, improved platform efficiency, and better-than-expected profitability across streaming businesses.
Industrials posted an impressive 19.3% gain, benefiting from reshoring trends, infrastructure spending, and solid order backlogs in transportation, aerospace, and manufacturing. Utilities surprised many investors with a 16.0% return for the year, a reminder that yield-sensitive sectors can perform well when expectations around interest rates shift meaningfully.
Against that backdrop, energy delivered a respectable but below-market return—and that relative underperformance may be more important for investors looking ahead to 2026 than the headline number suggests.
Energy Sector: Moderate Gains, Wide Dispersion
The energy sector finished 2025 up 7.9%. That result was solid given the late-year pullback in crude prices, but it masked significant differences across industry segments. Upstream producers struggled, while refiners, integrated majors, and midstream companies delivered far stronger results.
According to data provider FactSet, refiners led the energy sector, after being down in 2024. The “Big Three” refiners—Marathon Petroleum, Valero, and Phillips 66—posted an average return of 24.6%. Valero led with an impressive gain of 37.0%, followed by Marathon (19.2%) and Phillips 66 (17.5%).
Integrated oil companies also rebounded after a challenging prior year. The foreign supermajors led the group, with TotalEnergies gaining 28.3%, BP up 24.5%, and Shell rising 22.2%. U.S. supermajors posted double-digit gains as well, with ExxonMobil up 16.0% and Chevron gaining 10.1%. While diversified operations helped cushion the impact of weaker oil prices, upstream exposure still weighed on results relative to refiners.
Midstream companies followed up a strong 2024 with another excellent year. The average midstream stock gained 17.2% in 2025, again based on FactSet classifications. NGL Energy Partners led the group with a 100.4% gain. Only nine of the 39 companies classified as midstream finished the year lower, underscoring the sector’s appeal to income-oriented investors amid a volatile commodity backdrop.
Pure exploration and production companies lagged the rest of the energy sector in 2025. The average upstream stock declined 3.0% for the year, and more than half of the companies in the group finished in negative territory. ConocoPhillips, the largest pure-play producer in the segment, fell 2.3%. One notable exception was Canada, where several producers posted strong gains, led by Suncor, which rose 29.7% for the year.
What 2025 Revealed About Energy
The key takeaway from 2025 is not that energy underperformed, but why it did. Returns increasingly depended on business models rather than broad exposure to oil prices. Companies with stable cash flows, pricing power, and fee-based revenue streams generally outperformed those tied directly to upstream production.
That divergence reflects a broader shift in how energy capital is being allocated. Investors are rewarding durability, capital discipline, and downstream leverage over pure production growth. That trend was visible throughout 2025 and is likely to remain a defining feature of the sector in 2026.
Looking Ahead to 2026
As the market turns its focus to 2026, the outlook for energy remains mixed but nuanced. Oil prices will still matter, but they are unlikely to be the sole driver of returns. Instead, dispersion within the sector is likely to persist.
Refiners enter 2026 with healthy balance sheets and the ability to benefit rather than suffer from volatility. Integrated supermajors continue to offer diversified exposure, but their performance will hinge on how effectively they balance shareholder returns with capital spending. Midstream companies remain well positioned as long as volumes hold up and financing conditions remain stable.
Energy may not lead the market in 2026, but it is no longer moving as a single trade. For investors, that creates both risk and opportunity. The winners are likely to be determined less by the direction of oil prices and more by execution, capital discipline, and where each company sits along the value chain.
This article was written by Robert Rapier from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.