The Energy Select Sector SPDR Fund (NYSE:XLE) is up 25% year-to-date, and remains the best-performing sector in the S&P 500. But it is also the only sector deep in the red since President Donald Trump floated an end to the war in Iran, and one of Wall Street’s most-followed strategists is telling clients to buy the selloff.

Ed Yardeni flipped back to overweight Energy this week after giving up on the sector two years ago, suggesting that the recent pullback in oil stocks is a gift to investors willing to bet that oil prices will not return to pre-war levels.

“We are inclined to use the recent selloff to overweight the sector,” Yardeni wrote in a Monday’s note.

The Yardeni Research call is that the market is pricing a clean, fast end to the Iran war, and that this is the wrong read.

Yardeni Says The Pre-War Oil Price Range Is Gone

The Yardeni thesis on oil prices is that Brent crude now trades in a $75-to-$95 range post-war, and that the pre-war range of $55-to-$75 is finished.

Two forces, in his view, make that permanent. The first is physical damage to energy infrastructure across the Arabian Gulf.

The second is a structural repricing of maritime insurance and transit confidence through the Strait of Hormuz.

Even a full reopening of the Strait of Hormuz, Yardeni indicates, would not immediately restore normal oil flows. As he puts it: “The supply shock is likely to have a long tail.”

Bank of America’s commodity team, led by Francisco Blanch, lands in roughly the same neighborhood on oil prices.

In the Global Energy Weekly published ...