BP (LSE: BP) shares have delivered strong returns for investors in recent months, rising 16% over the past three months and 53% over the past year, with dividends on top of those gains.
The FTSE 100 oil major has benefited from Middle East tensions, which pushed energy prices higher and sent investors seeking shelter in oil and gas stocks during a volatile period.
However, reports emerging on 25 May suggest the US has struck a peace deal that could see Iran relinquish uranium enrichment and reopen the Strait of Hormuz, raising fresh questions about BP’s near-term trajectory.
With UK markets closed for a Bank Holiday at the time of the reports, any market reaction to the potential agreement had yet to materialise, though analysts expect significant movement once trading resumes.
BP’s first quarter results, published on 28 April, showed a strong start to 2026, with quarterly revenue climbing by £5.3 billion to £52.3 billion, driven partly by its trading division as customers rushed to secure energy supplies.
Despite that momentum, sustained performance remains heavily dependent on geopolitical conditions and the direction of global oil prices, both of which remain deeply uncertain in the current environment.
The company’s recent run follows a turbulent 25-year history that has included the 2001 dotcom crash, the 2007 financial crisis, the 2010 Deepwater Horizon disaster, the Covid-19 pandemic, and a £25 billion writedown on its stake in Russian state oil company Rosneft following the Ukraine invasion.
Leadership instability has also weighed on the business, with the two most recent chief executives, Bernard Looney and Murray Auchincloss, both departing suddenly in circumstances that unsettled investors and added to boardroom uncertainty.
On the tax front, Chancellor Rachel Reeves has scrapped a rule allowing oil and gas companies to offset UK profits against overseas losses, a measure introduced to fund a £1.8 billion cost-of-living support package that will add further financial pressure on BP.
The existing windfall charge on energy producers already accounts for roughly one third of the total taxes BP pays to the UK government, meaning the latest fiscal change compounds an already significant burden on the company’s domestic earnings.
Share buybacks remain on hold, which has disappointed some investors who had anticipated capital returns as part of the group’s broader shareholder distribution strategy following the strong quarterly result.
Despite recent price gains, BP’s forward price-to-earnings ratio sits at a relatively modest 8.2, while the forecast dividend yield stands at 4.6%, figures that some long-term investors may still regard as attractive at current levels.
Energy stocks like BP are widely regarded as cyclical, meaning their performance tends to track the broader commodity cycle rather than delivering consistent linear growth across all market conditions.
Any resolution to the Iran situation could place downward pressure on oil prices, which in turn would likely weigh on BP’s trading revenues and reduce the geopolitical premium currently embedded in its share price.
At the same time, peace negotiations involving Donald Trump carry inherent uncertainty, and any breakdown in talks could reverse the situation and provide renewed support for oil prices and BP’s valuation.