Key insights
- Geopolitical tensions between the US and Iran escalated over the weekend with retaliatory strikes, leading to a significant jump in crude oil prices. This surge boosted shares of UK oil majors like Shell and BP. The renewed fears of supply disruptions in the Middle East, particularly concerning the Strait of Hormuz, are a key driver. While the direct impact on US equities might be moderate, higher energy costs can influence inflation and consumer spending, creating a mixed outlook.
Investing.com -- Shares in British oil majors climbed on Monday as crude prices jumped more than 3% after the U.S. and Iran exchanged strikes over the weekend, dashing hopes for a near-term extension of their ceasefire and reigniting fears over oil supply disruptions in the Middle East.
Brent crude rose $2.93, or 3.2%, to $94.05 a barrel by mid-morning in London, while U.S. West Texas Intermediate gained $3.36, or 3.9%, to $90.72. The moves came after both benchmarks posted steep monthly losses in May as optimism had briefly taken hold that a peace deal could reopen the Strait of Hormuz and ease supply constraints.
The upswing boosted U.K. oil stocks, with Shell and BP rising around 1.2% and 1%, respectively. Harbour Energy and Ithaca Energy also climbed around 2.2% each.
The U.S. said on Sunday it had conducted "self-defence strikes," while Iran’s Islamic Revolutionary Guard Corps said its aerospace force had targeted an air base used for American attacks.
Israel also ordered troops to advance further into Lebanon in its campaign against Tehran-backed Hezbollah, compounding the deteriorating outlook for de-escalation.
Ceasefire negotiations between Washington and Tehran continued over the weekend, with both sides seeking changes to a draft agreement that would extend the truce and reopen the strait, though the progress remained unclear. U.S. President Donald Trump said on Friday a decision on the proposed deal was imminent.
The Strait of Hormuz, through which roughly a quarter of global seaborne oil passes, has been nearly shut since the war began in late February, sending Brent more than 25% higher over that period.
While some tankers have managed to slip out of the Persian Gulf in recent weeks, attacks on vessels transiting the strait have continued. Chevron Chief Executive Mike Wirth said on Friday that the risks for shipowners remain "very real."
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