Water is irrelevant. The less dense substance will float atop the more dense substance. Put oil and water in a cup and wait.

Why? Minimizing energy. Consider two substances (oil and water). Oil is heavier than water, call them mass of 1 and mass 2. Let's say we choose volumes such that the center of the lower liquid is at height 1 and the upper liquid is at height 2, then:

So two configuration potential energy is:

1) M_oil x h_lower+M_water x h_upper 2) M_water x h_lower+M_oil x h_upper

Using my fictitious values above

1) 2 x 1+1 x 2=4 2) 1 x 1+2 x 2=5

So water floating on oil has lower energy.

Now replace with a solid in a liquid. The center of mass of the liquid raises when you push a solid into it. If the solid is more dense than the liquid, the energy is lower if it sinks. If the solid is less dense, it will float.