The BP (LSE:BP.) share price has had a remarkable 12 months. Shares in the oil & gas giant have climbed 49.2% over the last year, turning a £2,500 initial investment into roughly £3,730 today!
But with Brent crude hovering around $100 a barrel on Middle East tensions, the obvious question is: can BP keep climbing from here?
What’s driving the surge
It isn’t hard to understand why BP shares are on the rise right now. The de facto closure of the Strait of Hormuz sent Brent crude spiking to $138 a barrel in early April. And while prices have been volatile, they have remained elevated near $100 since.
For an oil major like BP, that creates a powerful earnings tailwind that is hard to ignore. After all, with the cost of production largely unchanged, oil & gas producers are currently benefiting enormously from their operating leverage.
In the first quarter of 2026, results underlined this spectacularly. BP reported underlying profit of $3.2bn for the period, more than double the $1.38bn it earned year on year and well ahead of the $2.67bn analysts were expecting.
CEO Meg O’Neill said the quarter demonstrated “strong operational and financial delivery,” with exceptional oil trading and high refining availability both contributing. And subsequently, the company also nudged its quarterly dividend up 4%.
That’s terrific news for existing shareholders. But where does that leave other investors today?
Can the rally continue?
The bull case is quite compelling on the surface. With the war in the Middle East sending oil & gas prices through the roof, earnings estimates for BP have been revised sharply higher, free cash flow generation has improved significantly, and net debt’s on a downward trend targeting $14bn-$18bn by end-2027.
The bear case though, is hard to ignore. The Energy Information Administration (EIA) currently expects Brent prices to fall to around $89 a barrel in the fourth quarter of 2026 and then $79 in 2027 as Middle East production eventually recovers. If that forecast plays out, the exceptional trading and refining margins that powered these latest results may be short-lived.
There’s also the question of execution risk. BP’s upstream production is still being disrupted by the Middle East conflict, and the second quarter’s expected to be softer both on production and midstream results.
That doesn’t mean the business is about to see profits fall off a cliff. But it does highlight several looming headwinds that could undermine investor confidence and trigger a wave of profit-taking activity.
So what should investors do with all this information?
The bottom line
Even if the US-Iran conflict were to end tomorrow, it would still take considerable time to ramp oil & gas production back up. That’s why the EIA’s forecast projects prices to remain elevated into 2027.
That’s obviously good news for companies like BP. The only trouble is a lot of this expected growth seems to already be baked into the share price. And as such, any surprise hiccups along the way could trigger significant volatility.
That’s not a risk I’m personally keen on taking. But for investors with a higher risk tolerance and looking to diversify into the energy sector, BP shares could be worth a closer look.
Should you invest £5,000 in Bp P.l.c. right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
