BP, Shell and Centrica drop with crude in wake of new Iran ‘ceasefire’ Proactive uses images sourced from Shutterstock
BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) led UK energy stocks lower on Wednesday after oil prices slumped following news of a two-week ceasefire in the US-Iran conflict and signs that traffic through the Strait of Hormuz could resume.
BP shares were down 7.77% at 551.10p in early trade, while Shell shares sold off some 6.6% to 3,331.5p.
Centrica PLC (LSE:CNA), which is less directly tied to upstream crude prices but still moves with broader energy sentiment, was down 3.25% at 211.60p.
The sell-off came as crude gave back a chunk of its recent war premium, with Brent easing more than 16% to around US$91 a barrel while WTI slid roughly 16% to just above US$94 after US president Donald Trump said a ceasefire had been agreed, subject to Iran allowing the “complete, immediate, and safe” reopening of the Strait of Hormuz.
Tamas Varga, analyst at PVM Oil Associates, called the reaction “textbook”, saying equities were broadly staging a relief rally while oil went “into freefall” on expectations that 10-13 million barrels per day of crude and product supply stranded behind the Strait could gradually return. He added that the current quarter still looks set to be the tightest period for oil balances, and said a return to sub-US$70 crude remains unlikely over the next year or two because the geopolitical risk premium should stay elevated.
Elsewhere, stockbroker Shore Capital similarly expects relatively high crude to remain a feature in the market. Analyst James Hosie added: “Even if this ceasefire becomes a more lasting peace agreement, we do not expect oil and gas prices to return to their pre-conflict levels as it will take time for industry operations in the Persian Gulf to normalise.”