Oil majors and North Sea producers fell sharply on Monday after a pause in US strikes on Iran sent crude prices tumbling and eased fears of a wider Middle East conflict.
Shell, BP and Harbour Energy were among the biggest fallers on the FTSE 100 and FTSE 250 as markets reacted to hopes of a return to ceasefire talks. Shares in all three are trading lower on the session, with smaller North Sea producer Harbour Energy hit hardest.
Shell shares are down 1.7% at 3,248.5p, having fallen as low as 3,232.5p, against Friday’s close of 3,305.5p. BP has fallen further, down 3.7% at 528.3p versus Friday’s 548.4p close. Harbour Energy is down 6.1% at 240.45p, its steepest fall of the three, from Friday’s 256.2p close. According to Proactive Investors, Brent crude fell 6.1% to $90.87 a barrel on Monday, having climbed above $101 last week, while US benchmark WTI dropped 5.5% to $84.37 after touching a seven-week high above $93 on Thursday.
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Ceasefire hopes hit crude price
The sell-off follows a halt in US strikes on Iran, which Washington has not resumed since Friday. Tehran has indicated it does not intend to retaliate again for now, fuelling hopes that the two sides could move towards diplomacy after weeks of escalating attacks.
Lower oil prices weigh most heavily on producers because they reduce the value of future output and squeeze expected cash flow and shareholder returns, which explains why Harbour Energy and other North Sea names moved more sharply than the diversified majors. Supply risks have not disappeared entirely: shipping through the Strait of Hormuz remains severely disrupted, and Houthi attacks in the Red Sea, along with a declared blockade against Saudi Arabia, continue to slow tanker traffic, according to Proactive Investors and IndexBox.
The move comes just a week after Brent set a two-month high, underlining how quickly sentiment has swung as the conflict’s trajectory has shifted.
Analysts remain broadly constructive on the sector’s underlying earnings power even as the geopolitical premium unwinds. According to Proactive Investors, Jefferies has reiterated a Buy rating and a 4,500p price target on Shell, after raising its cash-flow estimate on stronger trading and Integrated Gas volumes flagged in the company’s most recent quarterly update.
Attention now turns to earnings. BP is due to report next-quarter results on Tuesday after market close, followed by Shell on Thursday, also after the close, giving markets a fresh read on how much of the recent oil price swings have fed through to trading profits. With the ceasefire still fragile and Hormuz shipping only partially restored, further volatility in crude, and in the shares of the companies most exposed to it, looks likely in the days ahead.