Sustained oil price surge ‘unlikely’, investors say as European oil shares rally
European oil shares surged after US and Israeli attacks on Iran heightened geopolitical tensions, though analysts warned that the rally in energy stocks and oil prices may be short-lived
Shares in European oil majors such as Shell and BP rose sharply on Monday morning as markets reacted to the immediate fallout from the military strikes and Washington’s hardening rhetoric toward Tehran.
Brent crude prices climbed 8%, prompting speculation among European investors about the risk of disruption to the Strait of Hormuz, a critical chokepoint for global energy supplies.
The Strait of Hormuz, a key shipping route in the Persian Gulf, carries roughly one-fifth of global oil and liquefied natural gas supplies, underlining the vulnerability of fossil fuel markets to geopolitical conflict.
Although shares in European oil majors rose sharply at the open and remained more than 2% higher by the close, analysts noted that European producers are generally less reliant on the Strait for exports than some of their Asian counterparts.
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Christophe Boucher, CIO at ABN Amro Investment Solutions, argued that a prolonged shutdown of the Strait was “highly unlikely.” “A closure of the Strait would have major implications for the global economy and would harm Iran itself as well as its regional allies. Gulf countries bordering Iran would not remain inactive in the event of a prolonged disruption,” he said.
Looking further ahead, Boucher added that oil markets were already facing a structural surplus, which could be reinforced if OPEC+ countries proceed with plans to increase production.
The International Energy Agency forecasts a significant global oil supply surplus of approximately 3.7 to 3.8 million barrels per day in 2026, driven largely by rising production outside the OPEC+ bloc.
John Wyn Evans, head of market analysis at Rathbones, warned that the conflict could have broader repercussions across financial markets, particularly given already tightened financial conditions and vulnerabilities in US private credit markets.
“Overall, the consensus among market strategists is that the conflict is likely to remain contained in duration and scale, though the risk of miscalculation is high. In the near term, the interplay between geopolitical tension, energy markets and inflation expectations will be the main driver of sentiment. Investors are likely to remain cautious until clarity emerges on both the security situation and the extent of any supply side disruption,” he said.
Jonathan Waghorn, portfolio manager of the Guinness Global Energy Fund, which invests exclusively in oil and gas companies, said the duration of the conflict would be decisive. However, he believes there is now “a more persistent geopolitical risk premium in oil and gas prices than was evident prior to the outbreak of current hostilities.”
Amid the renewed volatility, Simon Stiell, Executive Secretary of UN Climate Change, argued that the crisis once again demonstrated the relative resilience of renewable energy compared to fossil fuels.
“Alongside its brutal human costs, this latest upheaval shows yet again that fossil fuel dependence leaves economies, businesses, markets and people at the mercy of each new conflict or trade policy shock,” he said.
“But there is a clear solution to this fossil fuel cost chaos. Renewables are now cheaper, safer and faster to deploy, making them an obvious pathway to energy security and sovereignty. It is a key reason renewables overtook coal last year as the world’s largest source of electricity. However, the global transition remains too slow, and many developing nations require significantly more support to accelerate progress. I fully echo the Secretary General’s call that everything must be done to avoid further escalation. Protecting civilian lives is essential.”
