Investors in rival BP (LSE: BP) have even more to shout about. The oil giant has had a wretched time since the Deepwater Horizon catastrophe in 2010. That was followed by a messy U-turn on renewables, constant pressure from activist investors, and the relatively quickfire exit of two CEOs.

When I decided to add an oil stock to my SIPP 18 months ago, I chose BP because of its problems, not despite them. The shares were cheap, the yield topped 6%, and I saw recovery potential if it got its act together. I’m still not convinced the BP strategy is fully there, but the shares are up a mighty 63% over the last year and 33% over the last three, otherwise volatile, months. The dividend yield has slipped, but still pays a solid 4.26%.

Top FTSE 100 growth stocks today

Where both stocks go in the short run largely depends on events in Iran. Lately, investors have chosen to be more optimistic. Brent crude has eased back to $95 a barrel, and BP and Shell have retreated too. But if the Strait of Hormuz supply route remains under threat, shortages could bite quickly and oil and their stock prices could surge again. Over the next few weeks, anything could happen. But in the long term, this conflict could prove to be bad news for BP and Shell.

It’s reminded everyone just how essential oil and gas remain to the global economy. But it’s also revealed how exposed importing nations are to supply shocks. Until now, there was at least an assumption that key shipping lanes would stay open. That no longer feels certain. Hormuz has always been a potential chokepoint, but now it’s being throttled. All it takes is one cheap drone to stop a massive tanker.

The oil giants could slide

As a result, countries could accelerate plans to cut their reliance on imported oil and gas. China is ahead of the game, and major fossil fuel importers such as South Korea, India, South Africa, Turkey and Italy have fresh incentives to follow. Across Africa, micro-solar is expanding rapidly. Nobody wants to be at the mercy of geopolitical shocks.

If Iran tensions ease quickly, that urgency may fade, but a hard lesson has been learned. The world will still need oil and gas for years, not just for energy but for plastics, fertiliser and pharmaceuticals. Yet this could prove a turning point.

I think both BP and Shell are both worth considering today, as part of a balanced portfolio. But a vague long-term risk has suddenly come into sharper focus. There may be better long-term opportunities out there today.

The post Does the Iran war spell long-term disaster for BP and Shell shares? appeared first on The Motley Fool UK.

Anyone spending £5,000 on the energy giant’s shares today would only be able to afford 149 of them. Does this mean it no longer makes sense to consider buying Shell’s stock? Let’s explore this further.

An unfortunate reality

It’s an uncomfortable truth that whenever there’s trouble in the Gulf region, Shell will be one of the beneficiaries. Unlike the vast majority of companies, soaring energy prices will boost its bottom line.

But commodity prices are impossible to predict with any accuracy. Their volatile nature means nobody knows with any certainty what Shell’s earnings are likely to be from one period to another.

Take the oil price as an example. Looking back to the start of 2005, the average monthly price of a barrel of Brent crude has varied from $18.38 (April 2020) to $132.72 (July 2008). Yes, it’s been over the psychologically important $100-mark during 55 of the past 255 months. But it’s also been below $55 in 50 of them.

Even so, the need for oil and gas, and the sheer size of Shell’s business, means that other than during the most exceptional of times – the pandemic is a recent example – it remains hugely cash generative.

From 2021-2025, it produced an enormous $265.3bn of cash from its operations.

But energy industry infrastructure is expensive and is often funded by borrowing. Indeed, the group’s net debt increased by $6.9bn to $45.7bn during 2025.

Not bad for income

In recent times, the group’s dividend has been pretty good.

From its adjusted earnings per share of $19.03 over the past five years, it’s returned $6.06 to shareholders. In cash terms, its 2025 payout was 62% higher than in 2021.

Although the recent surge in Shell’s share price has pushed its yield lower, the stock’s still paying 3.2%. This is slightly above that of the FTSE 100 as a whole.

However, it’s important to remember that dividends cannot be guaranteed.

My view

Although Shell is a reliable performer, I think there are better opportunities to consider elsewhere in the sector, like BP (LSE:BP).

Although it’s also affected by volatile energy prices and has a large debt pile, it’s part-way through a significant cost-cutting programme. And it’s selling some non-core assets to reduce borrowings.

Under shareholder pressure, BP’s actively seeking to address the fact that it has a lower margin than its larger rival and, even though it generates less revenue, it employs more people.

All companies in the sector will see their revenue move up or down in line with energy prices. But I think that BP, by becoming leaner and more efficient, will outperform Shell — relatively speaking — over the next few years.

And with a yield of 4.2%, its dividend is more generous.

On this basis, for investors who are comfortable with the sector, I think BP could be a stock to consider. But only by those who are prepared to take a long-term view and will be able to ignore the volatile nature of the group’s revenue and earnings.

The post 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now? appeared first on The Motley Fool UK.

With the Middle Eastern oil & gas supply chain massively disrupted by the US-Iran conflict, fossil fuel prices have marched to multi-year highs, enabling diversified oil & gas producers like Shell to capitalise on their enormous operating leverage and rake in chunky profits.

Yet with news of a temporary ceasefire, Shell shares dropped sharply last Wednesday as investors began locking in their profits.

While it was certainly a relief to see a move towards de-escalation and peace, it’s important to recognise that the war has only been paused at this stage. And with peace negotiations on Sunday ending without an agreement, a return to hostilities could have significant implications for Shell and its share price.

Let’s breakdown some scenarios and estimate roughly where the Shell share price could end up over the next 12 months.

Scenario 1: the war rages on

If peace negotiations between the US and Iran breakdown and the conflict resumes, high oil & gas prices are likely inevitable in the short term. In fact, analysts at Bank of America have projected that the price of Brent crude could reach as high as $130 per barrel if Gulf disruptions persist into the second half of 2026.

That would pave the way for significant margin expansion for Shell. After all, the cost of producing one barrel of oil is mostly fixed.

However, with LNG production facilities in Qatar, Shell’s production volumes would also suffer, offsetting some of the profits. It also puts some of the company’s production assets in the potential cross hairs of the Iranian military, which, if targeted, would take years to repair at a very high cost.

Combined, the average consensus among experts in this scenario points towards a Shell share price of around 4,000p-4,500p. If accurate, that means a £5,000 investment today could be worth £5,850-£6,580 by this time next year.

Scenario 2: a peace agreement’s reached

If peace negotiations are successful, then oil & gas production across the Gulf states will begin to restart alongside repairs to infrastructure. However, fossil fuel prices won’t suddenly drop back to pre-war prices.

Bringing production back online is a gradual process, as is repairing damaged energy infrastructure. As such, a production normalisation across the remainder of 2026 will likely result in a non-linear fall in oil & gas prices, with current estimates projecting the price of Brent crude falling to around $70 per barrel 12 months from now.

At this price point, Shell’s recent earnings would compress significantly, likely dragging the shares back down towards pre-war valuation levels of around 2,900p, potentially crushing a £5,000 investment to £4,240.

The bottom line

Shell’s in a complex situation, which makes it difficult to predict which way its shares could move in the near-term. Its robust balance sheet does provide some handy resilience to lower oil & gas prices. But even in a higher price environment, the loss of production volumes presents a significant challenge.

Personally, I find this uncertainty in the least bit tempting. So I’m in no hurry to start snapping up shares today. But it’s still a business I’m watching closely.

The post Prediction: 12 months from now, £5,000 invested in Shell shares could be worth… appeared first on The Motley Fool UK.

US president Donald Trump primed markets for a major escalation in Iran yesterday, then announced a 14-day ceasefire. UK blue-chips have soared in a huge relief rally. Mining stocks Antofagasta and Anglo American are both up more than 10%, with Rolls-Royce Holdings is close behind. Just six FTSE 100 stocks have fallen.

My own SIPP has taken a knock over the last month, with BP a rare bright spot. Today that’s flipped, as my recent laggards turn into leaders. What now?

The FTSE 100 is flying!

I’m not chasing this morning’s surge. Barclays was at the top of my buy list, but after this morning’s 8% jump I’ve decided to wait a little longer and see how prices settle. Instead, I’m wondering whether this is the moment to add to my stake in BP or diversify by buying Shell. The ability to disrupt roughly a fifth of global supply via the Strait of Hormuz has given Iran a chokehold on the global economy. It also shows that the world is heavily dependent on fossil fuels. Which reinforces the importance of the oil majors.

Companies like BP and Shell remain central to our energy security, with vast infrastructure, global distribution networks and the financial strength to sustain supply through volatile conditions. Even as the energy mix evolves, these companies retain scale and expertise that are difficult to replicate. Also, oil and gas extend far beyond fuel. They’re essential for feedstocks and fertilisers, as well as plastics, rubber and pharmaceuticals, driving demand across multiple industries.

At The Motley Fool, we focus on long-term investing rather than reacting to sharp daily moves like today. Over time, BP and Shell are still likely to play a significant role in the global economy. What today’s drop does do is make both cheaper to buy. Investors who missed the recent oil price rally may see value here. BP trades on a modest forward price-to-earnings ratio of 11.4 and is expected to yield 4.3% this year. Shell has a forecast P/E of 12.5 and a yield of 3.2%.

Despite today’s drop, both have delivered strong returns. BP is up 70% over the past year, while Shell has gained 50%.

There are risks. Heightened geopolitical tension could accelerate the shift towards renewables as governments seek greater energy independence. Policy pressure, carbon regulation and the climate change concerns could all hit valuations over time.

The situation in Iran is impossible to predict, and the short-term path for markets remains uncertain. Even so, this could be a moment to consider buying the dip. Investors must take the long-term view though. In the short term, BP and Shell shares could go anywhere. As could the rest of the FTSE 100.

The post The BP and Shell share price are being hammered today – what should investors do? appeared first on The Motley Fool UK.

The conflict in Iran has sent the oil price soaring from just over $60 a barrel, to $113 at time of writing (31 March). And with no easy end in sight, it could go a lot higher. Gas prices are surging too. Where will this end?

Right now, many will switch on the news and see big oil and gas as a one-way bet. But there are complications upon complications. Events in Iran are impossible to predict. So is the market response to them.

FTSE 100 stars today

If some kind of peace treaty is brokered, the Shell and BP share prices could both reverse, even as oil prices and shortages intensify. Markets are forward looking, and will take a view on how things look likely to stand in roughly nine months time, rather than today.

It’s the same story with the oil price. While the price spike will boost revenues per barrel sold, they’ve got to get those barrels to market. Also, if profits soar while businesses and consumers struggle, panicky politicians could hit Big Oil with punitive windfall taxes.

It can also be dangerous to chase a share price higher. Latecomers could find themselves sitting on instant losses, if the mood changes after they buy. Yet to my surprise, BP shares don’t look too expensive today. The forward price-to-earnings (P/E) ratio is jut 14.6.

The dividend yield has fallen, due to the price spike. But BP shares are still expected to pay income of 4.28% this year, rising to 4.48% in 2027. It halted its generous share buybacks in February, before the crisis.

Shell isn’t pricey either with a forward P/E of 13.5. It’s had a lower yield than BP for some time, and it’s forecast to pay income of 3.19% this year, rising to 3.33% in 2027. It’s still running a $3.5bn buyback programme. Current events could deter another one, as the board may consider it’s not a good look at the moment. That’s me guessing.

Economic opportunities, political threats

When I decided to add an oil stock to my SIPP a couple of years ago, I chose BP for two reasons. First, the dividend yield was much higher at 6%, and second, the shares had taken a beating because of boardroom missteps, including a bungled green transition and reversal. I felt they had recovery potential, if I was patient. I’m happy with my choice today.

There are huge challenges. Climate change hasn’t gone away. But the Strait of Hormuz blockage has shown us one thing. Our world desperately needs fossil fuels. The Gulf conflict may accelerate the switch to renewables, but even then we still need it for fertiliser, feedstock, pharmaceuticals, and much besides. With a long-term view, I think BP and Shell are both worth considering.

But investors watching their shares soar face a terribly choice. A sudden ceasefire could leave them vulnerable. I suggest drip-feeding money, taking advantage of any dips. But only buy with a long-term view, because the short term is unguessable.

The post The rocketing BP and Shell share prices leave investors facing a terrible choice appeared first on The Motley Fool UK.

Yet when looking at the outlook, some might be of the opinion that buying now’s a big gamble. Here’s why.

Warning signs

To begin with, a lot of the good news may already be factored into the current share price. The stock’s had a strong recent run, helped by rising oil prices and geopolitical tensions. But history tells us energy stocks can be very cyclical. When sentiment’s strong and oil prices are elevated, that’s often when expectations are already high.

Ultimately, it leaves less room for further gains because investors are already projecting the best-case scenario. Further, the oil price is a double-edged sword. Yes, the surge above $100 per bbl will help boost profits. But if prices spike too far, they can damage the global economy.

We know from the past that major oil shocks can trigger a recession, which would eventually hurt demand for energy and Shell’s earnings.

Finally, last month the business posted the latest quarterly results, and they weren’t flawless. Adjusted earnings fell from $5.4bn to $3.3bn this time around. For perspective, that was the weakest quarterly profit in nearly five years. It was blamed on a host of factors, including “lower marketing margins, lower realised prices and higher operating expenses”.

Taking a step back

When I consider all of those factors together, I do think it’s a big gamble to buy the stock right now. Don’t get me wrong, if it were trading near 52-week lows, given the weaker earnings and geopolitical uncertainty, it could be considered a good value pick. But with the share price at record highs, I feel it’s disconnected from what’s going on at the company.

Of course, some would disagree with me. If the conflict in the Middle East starts to de-escalate but oil still remains elevated, Shell could benefit from avoiding a global recession, but also enjoy the proceeds of high oil revenue. This could materially boost profitability.

Shell still generates huge amounts of cash. Even with the recent softer earnings, it produced tens of billions in operating cash flow and continues to return large amounts to shareholders through dividends and buybacks. This could interest income investors, with the divdiend yield at 3.11%.

Better options elsewhere

I think the risk relative to the potential reward of buying Shell shares right now doesn’t stack up. For exposure to the oil sector, there are more attractively valued stocks in the FTSE 100 and FTSE 250 for investors to consider. The same applies to people looking for dividend shares. On that basis, I’m staying away from Shell at the moment.

The post Are investors taking a massive gamble with the Shell share price? appeared first on The Motley Fool UK.

Moreover, its 2025 results show a business still capable of throwing off enormous free cash flow even in a relatively low oil price environment, as it was in 2025. All this underlines that the strategic pivot presented by CEO Wael Sawan last March is working well.

Despite this, I think there is a gap between the firm’s price and ‘fair value’, from which long-term investors might benefit. So, how much is it exactly?

Strong growth momentum

Shell’s share price will ultimately be powered by earnings growth, as with all firms. A big risk here is any prolonged period of bearish oil and gas pricing. However, consensus analysts’ forecasts are that its earnings will grow by an average of 7% a year to end-2028.

This looks well supported by its recent full-year 2025 results, which align with the strategic pivot unveiled last March. It centred on tighter capital discipline and a sharper focus on high‑return liquefied natural gas (LNG) and upstream assets.

Income attributable to shareholders rose 11% year on year to $17.8bn (£13.3bn), highlighting enhanced capital discipline and improved marketing margins. At the same time, underlying operating expenses fell 2% to $35.032bn,illustrating the impact of Shell’s simplification and cost‑reduction programme.

Meanwhile, LNG sales volumes increased 11% to 72.94m tonnes, underlining the strength of Shell’s trading and optimisation capabilities. New high‑return LNG and upstream developments also progressed in 2025, strengthening the long‑term production base that underpins future earnings momentum.

This included approval of the Gorgon Stage 3 development in Australia, adding long-life LNG volumes to the already growing portfolio.

Taken together, these trends suggest Shell’s streamlined portfolio and disciplined strategy are well-positioned to support sustained earnings growth ahead.

How undervalued is the stock?

Price is not the same thing as value in stocks. The former is whatever the market will pay at any point, while the latter reflects the underlying business’s fundamentals.

It is in the gap between the two that long-term investors can make serious profits over time. This is because asset prices (including shares) can converge to their ‘fair value’ over the long run.

The method of establishing any stock’s fair value is discounted cash flow analysis. This identifies where any stock should trade by projecting future cash flows and ‘discounting’ them back to today.

Some analysts’ DCF modelling is more conservative than mine, depending on the inputs used. However, based on my DCF assumptions — including a 7.6% discount rate — Shell shares are 26% undervalued at their current £33.64 price.

That suggests a fair value for the shares of around £45.46. So that gap suggests a potentially superb buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

Shell’s combination of disciplined strategy, world‑class cash generation and a clear valuation gap makes the stock a compelling prospect for me. As such, I will add to my holding soon.

I am also eyeing other even more deeply discounted, high-growth FTSE stocks.

The post Shell’s £33+ share price is near an all-time high, so why am I going to buy more as soon as possible? appeared first on The Motley Fool UK.

The index as a whole is down, but there’s a wide dispersion among individual stocks. And that’s what makes things interesting right now.

Oil prices

Two stocks have stood out from the crowd over the last month. Unsurprisingly, those are BP (LSE:BP) and Shell (LSE:SHEL).

Rising oil prices are good for both companies. But the trouble for the FTSE 100 as a whole is that they’re not good for much else.

Higher energy costs present companies with a dilemma. They can either increase prices and risk losing customers, or swallow lower profits.

The issue for the FTSE 100 is that it contains a lot of mining companies. And these have relatively high power requirements.

That’s been a big advantage in recent months. But it’s turned into a problem as oil prices have gone higher in the last few weeks.

Buy energy?

Anyone who doesn’t own oil stocks might be asking themselves why. I think, however, that there’s a good answer available.

Oil supply is under unusual pressure at the moment and that’s why prices are high. But this seems likely to be a temporary issue.

The situation in the Middle East is always uncertain. And that means there’s a constant chance of oil prices rising sharply.

Yet by itself, that’s not a good enough reason to own oil stocks. Investors need a more optimistic view of long-term oil prices. 

Oil stocks might be the only ones going up. But does it make sense for anyone who didn’t like BP shares at £4.74 to buy them at £5.63?

Can it continue?

The stock market was slow to react to the conflict in Iran. It’s as if investors thought it might be over quickly.

That’s still possible, but it seems much less likely now. Despite this, it would be surprising to see oil prices go much higher.

The danger is more that prices stay where they are for a long time or come down slowly. And that’s a real possibility.

One reason for this is the US isn’t affected by higher oil prices in a big way. It’s in a position where it produces more than it uses.

That’s not the situation with the UK. And this is why the FTSE 100 has fallen more than the S&P 500 in the last month or so.

Definitely not oil?

The possibility of an extended conflict makes BP and Shell look attractive. But they’re both trading at high multiples.

For cyclical firms, the price-to-earnings (P/E) ratio isn’t always a good metric. Volatile profits can be misleading.

A more stable – and therefore better – metric is the price-to-book (P/B) ratio. But BP and Shell look expensive on this basis.

Both stocks are trading at their highest P/B multiples in over five years. So there’s a lot of optimism already priced in.

The current conflict shows oil stocks can offer useful diversification. But I think the time to look at them is when things settle down.

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At the start of March, a barrel of Brent crude traded at roughly $73. Just a few weeks ago there was talk of it slipping below $60, even possibly touching $40 this year. Now it’s pushing $106. And if the crisis drags on, some analysts think oil could surge to $150, or even $200.

Nitpickers will point out that BP and Shell shares aren’t pureplays on the oil price. Both are huge global businesses involved in refining, chemicals, trading and renewable energy, as well as crude production. Even so, when oil prices move sharply, their shares usually respond accordingly.

FTSE 100 winners

We saw that during the energy shock after Russia invaded Ukraine in 2022, when both spiked. Over five years, the Shell share price is still up roughly 112%. BP’s climbed about 65% over the same period.

BP’s been held back by its own troubles. Two chief executives exited in quick succession and the group has U-turned on its attempted green transition. Ironically, that’s why I chose BP over Shell in 2024. The shares were trailing and the yield was higher as a result. I hoped the cycle would swing back in its favour.

Today, BP’s one of the brighter spots in my portfolio, alongside defence group BAE Systems. Over the last month, the shares have jumped 15.9%. That turned a £10,000 investment into roughly £11,590. Shell’s done marginally better, rising 17.25% over the same period. That £10k would now be worth £11,725.

Those are big short-term moves, offering investors some relief as markets struggle. Despite the growth, Shell looks reasonably value with a price-to-earnings ratio of 14.2. BP’s headline P/E looks absurdly high at 1,899.9%. However, that largely reflects accounting quirks and sharply reduced reported earnings in the most recent period, rather than a collapse in the underlying business.

Windfall tax threat

Of course there are risks. If the Iran crisis eases quickly, oil prices could fall just as fast and energy shares may retreat. Alternatively, if oil giants end up banking huge profits, pressure could grow for windfall taxes.

Before the Middle East crisis, both BP and Shell were warning of falling oil prices. On 5 February, Shell reported a sharp drop in quarterly earnings, although it still pledged to return $3.5bn to investors via share buybacks.

Five days later, BP paused its $750m quarterly share buyback, saying it needed to strengthen its balance sheet. Oil prices aren’t weak now, so let’s hope that buyback returns. Today, BP has a higher trailing yield of 4.6%, compared to 3.2% at Shell.

In the short term, the direction of BP and Shell shares will depend heavily on events in the Middle East. Over the longer term, the tragic crisis reminds us that oil & gas still play a key role in the global economy. I think both companies still merit consideration for a well-balanced portfolio.

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While nobody can predict the future – least of all artificial intelligences that are fond of a spot of hallucinating from time to time – for a bit of fun I asked ChatGPT what it ‘thought’ on the matter. I asked it: “Will the FTSE 100 hit 12,000 before 2027?”

The answer

The most interesting part of its analysis was the following probability estimate:

• 12,000 before 2027: possible but unlikely (~20%–35%)
• 12,000 by late 2027: fairly plausible (~50%–60%)

The reasoning for the numbers came from synthesis of a number of major forecasts. Although it should be pointed out that some of these are out of date! For example, analysts at UBS predicted a base case of 10,000 by the end of 2026 and a bull case of 10,800. Well, the FTSE 100 is higher than the base case already and briefly surpassed the bull case a few weeks ago too.

To add onto that, here a few of the important factors to keep an eye on:

• Weak pound: ~75%–80% of FTSE 100 revenues come from overseas companies, so a weaker £ boosts earnings.
• Commodity strength: oil, mining, and energy companies have huge weightings in the index.
• Lower interest rates: if the Bank of England cuts rates faster than expected, equity valuations could expand.
• Continued strength in big constituents: companies like Shell (LSE: SHEL), BP, and Rolls‑Royce Holdings have had large impacts on the index recently.

A buy?

While the Iran conflict (strangely missing from ChatGPT’s analysis) has put the brakes on the FTSE 100 as a whole, it has pushed up a few select companies. Oil major Shell is one that has surged with the price of oil topping $100 a barrel – it was less than $60 two months ago.

Could Shell be a good buy today? Looking at recent performance you would think not. The share price is only up 30% or so since 2014. That’s a miserly return even compared to the benchmark of a stuttering FTSE 100. The dividend is nothing to write home about either. A 3.2% yield is less than what’s available in some Cash ISAs at the moment.

That said, the current tragedy playing out in the Middle East could spark a turnaround. The price of oil increasing helps, for one. But it might serve to underscore just how important oil still is to the global economy. After all, Warren Buffett’s pal, the late Charlie Munger, said we would need oil for two hundred more years or more.

And as ChatGPT said, the size of Shell – at £184bn it dwarfs many of the £4bn–£6bn market cap companies on the index – means it has a hugely disproportionate weighting. If the FTSE 100 makes it to 12,000 before 2027 then Shell will likely play some part.

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