Canada Is an Oil Exporter: Are You Investing Like One?

Undoubtedly, the Canadian stock market is heavily exposed to heavy oil and pipelines. So, if you own an ETF that mirrors the TSX Index or something similar, you’ve probably got more than your fair share of energy sector exposure. Of course, the excessive exposure might be viewed as a negative, especially when we’re in tech-driven bull runs where oil stocks aren’t all too exciting. However, when the tides turn, and those shocks do happen, it tends to be a pretty good idea to be in the oil names.

While I do think that it makes sense to diversify away from the Canadian market (the S&P 500 is a top pick for index investors), I’m sure many investors are more than willing to stick with TSX stocks at a time like this. The Nasdaq Composite has officially fallen into correction territory, and the S&P 500 might not be all too far away (perhaps one more bad week if the war in Iran continues). And while the TSX Index hasn’t been unscathed (it’s actually a hair away from a correction), I still think that long-term investors shouldn’t fret.

At the end of the day, there are ways to up your oil exposure so that you’re better insulated from a shock that could have the potential to keep energy prices elevated for a few more quarters, maybe a year, or maybe several years. It’s hard to tell, but it’s wise to keep the geopolitical risks in check with a bit of energy exposure that goes beyond the TSX Index.

Suncor Energy and the producers have been hot, but it might not be too late to buy if you fear the oil shock

The domestic energy producers, such as Suncor Energy (TSX:SU), are overheated, and seem that much riskier after gaining close to 40% year to date. The first quarter of 2026 is shaping up to be one of those risk-on years, and with the oil shock likely to cause inflationary pressures, I’d argue that a name like SU stock could be intriguing right here, even if it means having to face the full force of the next correction if oil prices were to retreat rapidly.

Indeed, it would have been ideal to own the energy players for the long haul, but if you’re underexposed, I don’t think it’s a bad idea to dollar-cost average (DCA) into a tiny position starting today. If shares slip back below $80, perhaps buy a bit more, and if they’re below the $60–70 range, perhaps another buy could make sense for a long-term hold. Either way, the 2.7% dividend yield is decent enough to justify riding things out, whichever direction the Canadian energy names head next.

Of course, just hanging onto the TSX Index could make sense, but given pressure on the big banks and lack of oil price sensitivity from the pipelines, new investors might not be satisfied with the exposure to the top producers themselves.

The bottom line

In any case, I’m no fan of buying stocks on such strength. But if you were caught skating offside with minimal oil exposure and are worried about the oil shock and potential for the Middle East conflict to worsen in a way such that oil hits new all-time highs (who knows what level that’d entail), a bit of nibbling on the top Canadian energy plays, I think, could be the play, so as long as you understand the risks and the magnitude of volatility to expect from the price of oil and its producers.

The post Canada Is an Oil Exporter: Are You Investing Like One? appeared first on The Motley Fool Canada.

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More reading

• 1 Canadian Energy Stock Set for Major Growth in 2026
• 3 TSX Stocks Built to Earn, Pay, and Endure
• The Secrets That TFSA Millionaires Know
• 2 TSX Stocks I’d Buy When Markets Slide Again
• Prediction: These 3 Stocks Will Crush the Market in 2026

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.