BP and Shell’s shares were firmly higher on Monday after dramatic events in the Middle East over the weekend sent oil prices higher and took the FTSE 100 oil majors with them.
Three US servicemen were killed and many more injured in attacks by Iran-backed militia near the Syria/Jordan border. The US President has promised retaliatory measures in response.
BP rose 1.5%, and Shell gained 1.2% after Brent oil traded near $84 on Monday before falling back.
BP and Shell shares have struggled with falling oil prices in recent months, and the two companies trade significantly below 52-week highs.
Although today’s news may boost their share prices in the short term, the ongoing crisis in the Middle East may have implications for the demand story should inflation jump and interest rates remain elevated as a result.
“Oil prices advanced thanks to a renewed escalation in Middle East tensions, with a further attack on shipping in the Red Sea by Houthi rebels and three US soldiers killed in a drone attack on a US service base on the border of Jordan and Syria,” said AJ Bell investment director Russ Mould.
“Crude hitting its highest level since November feels ominous given it adds inflationary pressure at a time when borrowers and the markets are hoping to see interest rates cut. Geopolitical factors seem to be propping up oil at a time when the wider dynamics of supply and demand look less than favourable for the energy market.”