The Shell (LSE: SHEL) share price has dropped 8.4% in just five trading days, wiping out a chunk of the gains built up since February’s escalation in the Middle East.
The trigger was a US-Iran memorandum of understanding signed on 14 June, which has pushed crude oil prices sharply lower as fears of a wider supply disruption start to fade. So how much further could the shares realistically fall from here?
Crunching the numbers
The move has been sharp. The shares opened last Thursday (18 June) at 3,217p and now sit at 2,946.5p as I write on Thursday morning (25 June). That’s a fall of 270.5p, or 8.4%, in just a week. Zoom out, though, and the picture looks rather different:
- 5-day change: -8.4%
- 12-month change: +14.9%
- 52-week high: 3,758.5p
- 52-week low: 2,499p
- Distance from today’s price to the 52-week low: a further 15.2% fall.
In other words, even after this drop the shares are still comfortably up over the past year. The recent fall has only unwound part of the stock’s gains that built up during the conflict rather than erased it entirely. So is the 52-week low a realistic target, or is that overstating the risk?
Why I don’t think it will fall that far
Investing is a tricky game and no one knows just how far a given stock will fall. We’ve seen already this year that market shocks can appear (and disappear!) rapidly and impact valuations.
The company’s 52-week low was set back in June 2025 when the world looked very different. I think there are a few reasons why a return to that sort of level is unlikely.
The biggest factor here is the US-Iran war in the Middle East. While talks are ongoing and the 60-day memorandum of understanding has been signed, this already looks a bit shaky. Meaningful details remain unresolved, and any breach could send sentiment, and oil prices, straight back up.
Second, supply doesn’t recover as quickly as headlines suggest. Goldman Sachs expects Middle East oil exports to normalise only by late August, and Morgan Stanley has suggested production could take up to four months to fully recover. Shipping confidence through the Strait of Hormuz will also take time to rebuild, even with a deal nominally in place.
The risks that remain
This isn’t a one-sided story. A more durable, lasting peace deal would likely normalise crude oil prices and compress the current price-to-earnings (P/E) ratio premium the market has assigned. A sustained period of weaker crude would weigh on cash generation and the pace of future buybacks.
The company itself has shown some caution already. On 12 June, Shell paused its $3bn share buyback programme, which suggests management wanted flexibility while oil prices were moving sharply, not that they expected a collapse.
My verdict
In my view, a fall all the way back to the 52-week low looks like a worst-case scenario rather than a realistic base case.
However, I want to see how the dividend yield of 3.8% holds up at the next results before buying any shares given the current uncertainty.
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Ken Hall does not hold any positions in the companies mentioned.
