The Invesco Solar ETF (TAN) surged 127% from its 52-week low to hit a new high, as the Strait of Hormuz closure pushes oil prices higher and accelerates capital flows into solar energy.
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Solar ETF TAN surges 127% as oil crisis drives clean energy rotation
The Invesco Solar ETF (TAN) hit a new 52-week high on May 28, surging 127% from its March 2025 low of $31.40 per share, as the prolonged closure of the Strait of Hormuz drives oil prices higher and accelerates a global rotation into clean energy assets.
"The solar energy sector has become an area to watch, given surging oil prices driven by prolonged Middle East tensions and the continued closure of the Strait of Hormuz," Zacks Investment Research said in a note. The fund, which tracks the MAC Global Solar Energy Index and charges 0.70% in annual fees, now carries a positive weighted alpha of 119.96, per Barchart data, signaling continued upward momentum.
The catalyst is the Strait of Hormuz crisis. More than 11 million barrels per day of Persian Gulf oil and condensate production — roughly 20% of global supply — is now inaccessible, according to a May 20 report from Wood Mackenzie. The energy consultant's "extended disruption" scenario projects oil prices could approach $200 per barrel by year-end if the waterway remains closed through December. The International Energy Agency separately forecasts solar power will attract roughly $365 billion in investment in 2026, with total renewable power investment projected at approximately $665 billion.
The rally in TAN reflects a structural shift, not just a tactical trade. The IEA expects solar to draw $365 billion in investment this year alone, part of a $665 billion total renewable power pipeline. But the sector faces headwinds: the war in Iran has pushed aluminium prices on the London Metal Exchange up 15% since late February and COMEX aluminium futures more than 30%, according to Reuters. Aluminium accounts for 9% to 10% of total solar project costs through racking and structural components, BMI analyst Linda Zeng said. SEG Solar CEO Jim Wood told Reuters he is seeing roughly a 20% increase in racking selling prices across solar projects, warning that "marginal projects — particularly those with very tight returns — may fall off."
The U.S. Energy Information Administration expects developers to add 43.4 gigawatts of utility-scale solar capacity in 2026, a 60% jump from last year. Higher aluminium costs could add $5 billion in expenses for every 500 GW of installed capacity, Cherry Street Energy Chief Technology Officer Ben Damiani estimated. TAN currently carries a Zacks ETF Rank of 4 (Sell) with a High risk outlook, suggesting the rally has outpaced fundamental support in some holdings. The question for investors is whether the oil-driven rotation has further to run, or whether rising input costs will compress margins before the next wave of capacity comes online.
This article is for informational purposes only and does not constitute investment advice.
[1] Solar ETF (TAN) Hits New 52-Week High[2] Prolonged Strait of Hormuz Closure Could Upend Global Economies, Energy Sector Survey Says[3] World faces biggest-ever energy security crisis as Iran war disrupts fuel flows, warns IEA[4] Aluminium price spike from Mideast war fans costs for US solar industry
