Top 3 Halal Energy ETFs in the U.S

Written by Haider Saleem
Journalist and Political Analyst | LinkedIn / X

With global oil markets steadying and energy sector fundamentals improving, many investors are turning to ETFs – exchange-traded funds – for simplified, diversified exposure to this critical sector

This article highlights three top-performing U.S.-listed energy ETFs that are shariah-compliant:

1.      Energy Select Sector SPDR Fund (ARCX:XLE)

2.     Fidelity MSCI Energy Index ETF (ARCX:FENY)

3.     Vanguard Energy Index Fund ETF (ARCX:VDE)

1. Energy Select Sector SPDR Fund (ARCX:XLE)

• Expense Ratio: 0.08%
• 1-Day Return (June, 2025): +1.43%
• Top Holdings: ExxonMobil, Chevron, ConocoPhillips
• Assets Under Management: ~$40 billion

XLE is one of the most actively traded energy ETFs, providing concentrated exposure to major U.S. energy producers. Its focus includes oil and gas exploration, production, refining, and equipment services –  industries generally considered halal under AAOIFI screening.

As energy markets recover from recent volatility, XLE has gained from rising crude prices. According to Finimize, energy ETFs like XLE saw modest gains amid shifting gas prices and speculation around sector consolidation, including unconfirmed Shell-BP takeover chatter[1].

2. Fidelity MSCI Energy Index ETF (ARCX:FENY)

• Expense Ratio: 0.08%
• 1-Day Return (June, 2025): +1.46%
• Top Holdings: ExxonMobil, Chevron, EOG Resources
• Assets Under Management: ~$2 billion

FENY tracks the MSCI USA IMI Energy Index, giving broad exposure to U.S. large- and mid-cap energy stocks. While it shares many holdings with XLE, its weighting skews slightly toward mid-cap names, making it a useful complement for investors already holding XLE.

For halal investors, FENY offers a well-balanced portfolio in a low-cost wrapper. Its broad sector exposure and fidelity to sector purity make it a strong option for passive investors.

3. Vanguard Energy Index Fund ETF (ARCX:VDE)

• Expense Ratio: 0.09%
• 1-Day Return (June, 2025): +1.41%
• Top Holdings: ExxonMobil, Chevron, Schlumberger
• Assets Under Management: ~$10 billion

VDE offers exposure to over 100 energy-related companies and tracks the MSCI U.S. Investable Market Energy Index. It is slightly broader than XLE or FENY and includes midstream and oil services firms.

VDE’s broader scope includes more midstream and oilfield services companies, giving exposure beyond just the largest producers. Vanguard’s reputation for cost discipline and long-term portfolio construction makes VDE a trusted choice. As noted by The Motley Fool, VDE remains a standout choice for long-term investors due to its low fees, diversified exposure, and strong track record among sector ETFs[2].

Why Energy ETFs Appeal to Halal Investors

Energy ETFs:

• Avoid impermissible activities like conventional banking, gambling, and alcohol
• Track companies in physical, real-asset-based industries
• Offer income potential through dividend distributions from compliant firms

While these ETFs avoid impermissible sectors by focusing solely on energy, investors should periodically review fund holdings to ensure none drift into haram income sources or cross financial thresholds under AAOIFI rules.

Final Thought

XLE, FENY, and VDE each offer an opportunity to diversified holdings if you are lacking energy in your portfolio.

As always, investors should monitor fund holdings and updates to ensure continued Shariah compliance.

References

Shariah screening data was sourced from Musaffa’s classification platform. Expense ratio and return figures reflect independent analysis based on financial filings and earnings reports by the financial analyst.

1. Finimize, Shell Denies BP Takeover Rumors As Energy Prices Shift, June 2025
2. The Motley Fool, If I Could Invest $1,000 in Any Vanguard ETF, It Would Undoubtedly Be This One, June 2025

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