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London's FTSE 100 edged up 0.03% to 10,499.88 as gains in BP and Shell offset weakness from renewed US-Iran military strikes that pushed Brent crude above $78 a barrel. "Oil prices will be volatile over the coming months as the situation in the Middle East remains fragile," said Hamad Hussain, an economist at Capital Economics. BP climbed 2.5% and Shell added 1.8%, making energy the top-performing sector after the US struck dozens of Iranian military targets overnight in retaliation for attacks on commercial vessels transiting the Strait of Hormuz. Iran responded by targeting US military bases in Jordan, Bahrain and Kuwait, according to statements from both governments. Brent crude traded at USD78.72 a barrel early Monday, up from USD75.86 late Friday, a 3.8% gain that lifted the broader energy complex. The domestically focused FTSE 250 slipped 0.3% to 23,297.29, reflecting broader caution. Persimmon led the blue-chip index with a 3.4% gain, while Computacenter added 2.3% after Stifel upgraded the stock to buy from hold. GSK rose 0.8% after its phase 2 Azur-1 trial for Jemperli met its primary endpoint in rectal cancer patients. The pound weakened 0.2% against the dollar to USD1.3391, while gold eased 1% to USD4,059.90 an ounce. The yield on the US 10-year Treasury widened to 4.58% from 4.56%, reflecting inflation concerns tied to higher energy costs. The Strait of Hormuz, through which about 20% of the world's oil passes, remains the central risk. The US said it used one-way attack sea drones for the first time in its strikes, while Iran signaled it would no longer abide by the memorandum of understanding signed with Washington. Any sustained disruption to tanker traffic through the chokepoint would push crude prices higher and feed through to household energy bills, UK Prime Minister Keir Starmer warned at the NATO summit in Ankara. This article is for informational purposes only and does not constitute investment advice.
**Shell lifted its Q2 integrated gas output forecast to as much as 650,000 boed while flagging a sharp jump in gas trading profits.** Shell slightly raised its second-quarter integrated gas production guidance Tuesday to as high as 650,000 barrels of oil equivalent per day, while flagging that gas trading and optimization results would be "significantly higher" than the first three months of the year, the company said in a quarterly trading update. The British oil major now expects integrated gas output of 610,000 to 650,000 boed in the April-to-June period, up from a prior range of 580,000 to 640,000 boed. That still represents a decline of about 30 percent from the 909,000 boed produced in the first quarter, reflecting the impact of the Middle East conflict on Shell's operations. Production at Shell's Pearl gas-to-liquids plant in Qatar was halted in March after an attack on Ras Laffan Industrial City damaged one of the facility's two processing trains. Shell has said repairs could take about a year. About 20 percent, or 550,000 boed, of Shell's total oil and gas production comes from the Middle East, with roughly 10 percent of that tied to Qatar. Trading results at the chemicals and products unit, which houses the group's large oil trading desk, are expected to be in line with the first quarter's strong performance. Oil majors including Shell and its European peers BP and TotalEnergies reported robust oil trading in the first quarter, benefiting from price volatility triggered by the US-Israeli war with Iran. **Working Capital Swing and Margin Outlook** Shell forecast a $1 billion to $6 billion working-capital inflow in the second quarter, a sharp reversal from the $11.2 billion outflow recorded in the first quarter, reflecting the impact of volatility in commodity prices. Working capital, a liquidity measure of current assets minus liabilities, swung as price moves affected the timing of cash settlements. The company guided for higher indicative refining margins of about $20 per barrel and chemicals margins of about $240 per ton in the second quarter, though it cautioned that realized margins were running below those levels due to market dislocations. The quarterly update comes as European energy majors navigate a complex operating environment shaped by geopolitical risk, supply disruptions and volatile commodity prices. Shell's ability to sustain trading profits while managing the Pearl GTL outage and broader Middle East exposure will be closely watched when it reports full second-quarter results. This article is for informational purposes only and does not constitute investment advice.
Goldman Sachs strategists say heavy-asset companies are expected to deliver strong earnings this reporting season, extending their outperformance over light-asset peers as the HALO trade enters a second phase. "Investors remain under-positioned for a world in which physical assets, infrastructure and industrial capacity regain strategic importance," Guillaume Jaisson, a strategist at Goldman Sachs, said. A basket of European capital-intensive stocks has gained 15% year to date, driven by utilities and energy companies, while a gauge tracking light-asset stocks has fallen 2%. The divergence reflects a rotation away from high-valuation technology names toward companies with scarce physical assets, high barriers to entry and limited risk of obsolescence — the defining characteristics of the HALO theme. Pairing capital-intensive stocks long against capital-light stocks short has delivered a 20% return this year, Goldman data show. The second phase will require companies to deliver on earnings rather than rely on multiple expansion, the strategists said. Data centers, semiconductors, utilities and defense are expected to account for more than 40% of total capital expenditure in 2026, up from 25% in 2022, supporting the view that the capex cycle has further to run. **Capex Cycle Broadens Beyond AI** The HALO theme — an acronym for heavy assets, low obsolescence — was flagged earlier this year by Josh Brown, CEO of Ritholtz Wealth Management, as the most important trade of 2026. Since then, the strategy has gained traction as artificial intelligence disruption fears drove investors toward companies whose physical assets are difficult to replicate and unlikely to become obsolete. Goldman's buy-rated picks span five categories: infrastructure companies such as Enel and Veolia Environnement; basic materials including Shell and Air Liquide; aerospace and defense names like Airbus and BAE Systems; manufacturing and consumer platforms including Volvo and Nestlé; and the physical layer of technology, with ASML Holding and Deutsche Telekom among the selections. The trade is global, and the strategists said the new phase of physical economy growth may favor Europe, Japan and parts of emerging markets more than the U.S., where equity markets remain more concentrated in capital-light sectors. Earnings estimates already reflect the divergence, with heavy-asset stocks seeing the largest upward revisions in 2026. The S&P 500 has gained 10.1% year to date to 7,537, while the Nasdaq Composite has risen 12.4% to 26,121, driven largely by AI-related technology stocks. The 10-year U.S. Treasury yield has climbed 33 basis points this year to 4.50%, a move driven almost entirely by rising real rates rather than inflation expectations, according to Neuberger Berman's asset allocation team. Crude oil has gained 20.6% year to date, reflecting the energy security and industrial sovereignty themes that underpin the HALO trade. This article is for informational purposes only and does not constitute investment advice.
**Shell's gas traders reaped gains from Middle East volatility in the second quarter, but lost Qatari volumes dragged integrated gas production down 29% from the prior period.** Shell said its gas-trading division expects significantly higher results than the first quarter, while integrated gas production fell to between 610,000 and 650,000 barrels of oil-equivalent a day, down from 909,000 boe/d in the first three months of the year. "The production decline reflects the impact of the Middle East conflict on Qatari volumes," Shell said in its second-quarter outlook update published Tuesday. The company's oil traders also delivered a robust performance, with the chemicals and products division — which houses oil trading — expected to post results in line with the first quarter's $1.925 billion in adjusted earnings. That compared with a $66 million loss in the fourth quarter of last year. LNG liquefaction volumes are expected at 7.4 million to 7.8 million metric tons, versus 7.9 million in the first quarter. Upstream production is forecast at 1.75 million to 1.85 million boe/d, roughly flat from 1.84 million in Q1, while marketing sales volumes are seen at 2.55 million to 2.65 million barrels a day, compared with 2.63 million. The company's indicative refining margin rose to about $20 a barrel from $17 in the first quarter, while the indicative chemicals margin jumped to roughly $240 a ton from $139. Shell cautioned that given market dislocations, realized margins are lower than the calculated benchmarks. Working capital is expected to swing to positive $1 billion to $6 billion after a negative $11.2 billion in the first quarter, which Shell attributed to unprecedented volatility in commodity prices. Tax paid is forecast at $2.6 billion to $3.4 billion, up from $2.3 billion. The mixed update pits near-term trading windfalls from geopolitical volatility against structural production losses in a core profit center. Shell's integrated gas unit has been a key earnings driver, and the lost Qatari volumes raise questions about the durability of supply from one of the world's largest LNG exporters amid escalating regional tensions. Shell is scheduled to publish full second-quarter results on July 30, with consensus estimates compiled by Vara Research due July 22. This article is for informational purposes only and does not constitute investment advice.
Shell signaled a surge in second-quarter trading profit as the Iran conflict boosted oil markets, with refining margins climbing to about $20 a barrel and chemicals margins nearly doubling from the prior quarter. "Trading & Optimisation is expected to be significantly higher than Q1'26," Shell said in its quarterly update note published Tuesday, without providing a specific dollar range. The London-based energy giant's indicative refining margin rose to about $20 a barrel from $17 in the first quarter, while the indicative chemicals margin jumped to about $240 a tonne from $139. Integrated Gas production is expected at 610,000 to 650,000 barrels of oil equivalent per day, down from 909,000 in Q1, reflecting the impact of the Middle East conflict on Qatari volumes. LNG liquefaction volumes are forecast at 7.4 million to 7.8 million tonnes, compared with 7.9 million in Q1. The strong trading outlook shows how Shell and its peers are benefiting from the surge in crude prices after the Strait of Hormuz closure. The energy sector's earnings are expected to more than double year-over-year, according to FactSet, helping drive the S&P 500 to a second straight quarter of earnings growth above 20 percent. Shell's upstream production is forecast at 1.75 million to 1.85 million boe/d, largely in line with the 1.84 million in Q1. The chemicals and products division is running at near-full refinery utilization of about 100 percent, up from 99 percent in the prior quarter. Marketing adjusted earnings are expected to be in line with Q1, with sales volumes of 2.55 million to 2.65 million barrels per day. Working capital is expected to swing to a positive $1 billion to $6 billion from a negative $11.2 billion in Q1, which Shell attributed to "unprecedented volatility in commodity prices." Tax paid is forecast at $2.6 billion to $3.4 billion, up from $2.3 billion in the first quarter. Cash flow from operations will be closely watched by investors after the Q1 working capital drain. The last time Shell reported a comparable surge in trading profits was in Q2 2022, when the Russia-Ukraine war pushed energy earnings to record levels. The company's adjusted earnings that quarter reached $11.5 billion, more than double the prior year. Shell cautioned that given market dislocations, realized refining and chemicals margins are lower than the calculated indicative margins and have been adjusted accordingly. The update comes as the broader market prepares for a busy earnings season. Banks kick off second-quarter reports next week, with analysts expecting the S&P 500 to post 23 percent earnings growth, according to FactSet. The energy sector is projected to be the standout performer, with earnings expected to more than double as crude prices remain elevated. Shell's Renewables and Energy Solutions division is expected to post adjusted earnings of negative $300 million to positive $300 million, compared with $300 million in Q1, reflecting the volatile commodity environment. Corporate adjusted earnings are forecast at negative $500 million to negative $700 million, narrowing from negative $900 million in the prior quarter. The strong performance in Shell's core oil and gas operations contrasts with the challenges facing European energy rivals. BP and TotalEnergies are also navigating the impact of the Middle East conflict on their production and trading operations, though Shell's heavy exposure to LNG and refining gives it a differentiated earnings profile in the current environment. Shell is scheduled to publish its full second-quarter results on July 30. The company-compiled consensus, managed by Vara Research, is expected to be published on July 22. This article is for informational purposes only and does not constitute investment advice.
**Shell's latest LNG Outlook warns the world faces a structural supply deficit by the late 2030s unless investment accelerates, even as the industry proves it can weather a major Middle East crisis.** Global liquefied natural gas demand will rise about 65% to nearly 700 million metric tons a year by 2050, driven by Asian economic growth and coal-to-gas switching, Shell said in its 2026 LNG Outlook published Tuesday. The projection comes as the Strait of Hormuz disruption — which has shut in roughly one-fifth of monthly LNG supply since late February — keeps global trade on track to flatline this year. "The conflict created a system-wide shock with disruption cascading across all segments of the economy, but the LNG industry has proved resilient and able to adapt to changing market conditions," Cederic Cremers, president of Shell Integrated Gas, said in the report. LNG trade reached 422 million tons in 2025. Shell said 2026 volumes could match that level if Hormuz shipping returns to normal by the third quarter, but a prolonged disruption through year-end would produce the first annual contraction in more than a decade. Asian LNG imports for the first half of 2026 fell nearly 4% to 127.70 million tons from a year earlier, according to data from analytics firm Kpler. Spot prices in Asia peaked above $20 per million British thermal units during the crisis but have since retreated to $15.35, a near four-month low, as markets price in hopes of a peace deal. The report's most critical warning centers on the supply trajectory. About 180 million tons per year of new liquefaction capacity is expected online by 2030, driven largely by U.S. projects. But Shell's modeling shows global supply beginning to fall short of demand around 2037, with the deficit widening to between 100 million and 300 million tons annually by 2050 depending on how aggressively new projects are sanctioned. An additional 200 million tons per year of supply beyond what is already under construction will be needed through the 2030s and 2040s, the report said. **Asia's Demand Engine and the Looming Deficit** South and Southeast Asia will account for roughly 40% of global LNG imports by 2050 as countries replace coal with gas for power generation, Shell said. In mature markets such as Japan, data centers are emerging as a new source of electricity demand. LNG use as a marine fuel is expected to increase sevenfold to 27 million tons a year by 2035. The supply gap Shell projects is the predictable consequence of years in which investment signals were muddied by regulatory uncertainty and policy whiplash, particularly in the U.S., where a pause on new LNG export approvals during the Biden administration was reversed under President Donald Trump. The U.S. is on track to deliver more than 1,300 cargoes annually by the mid-2030s, the report said, but sustaining that growth requires permitting reform and predictable environmental reviews. The last time the LNG market faced a comparable supply shock was Russia's invasion of Ukraine in 2022, which sent European gas prices to record highs and triggered a wave of long-term contracting. Asian spot prices this year peaked above $20/mmBtu — well below the 2022 spike above $70 — reflecting the market's improved resilience from diversified supply sources and a larger share of term contracts, Shell said. **Investment Needs and the African Opportunity** Africa has already attracted more than $50 billion in LNG investment in 2026, according to the African Energy Chamber. Mozambique is advancing Coral Norte, a floating LNG facility expected online in 2028 with a record capacity of 6 million tons a year. Nigeria LNG, in which Shell is a shareholder, has been exporting for more than two decades, while Algeria operates four terminals with combined capacity of 25.3 million tons a year. "While more investment in both supply and demand infrastructure is needed, the long-term outlook remains strong and LNG will continue to be a stabilising force in the global energy system," Cremers said. The report's findings carry direct implications for energy security. Europe, which rushed to build regasification capacity after the 2022 crisis, now faces declining domestic gas production and will remain reliant on LNG imports to balance intermittent renewable generation. For Asia's emerging economies, the choice is starker: affordable LNG or a return to coal, with the attendant consequences for air quality and emissions targets. *This article is for informational purposes only and does not constitute investment advice.*
**Global liquefied natural gas supply risks a rare annual contraction if the Strait of Hormuz closure persists, Shell said Tuesday.** Shell expects global LNG trade to hold at about 422 million metric tons in 2026, flat from a year earlier, as the Strait of Hormuz disruption traps roughly a fifth of global supply behind the vital waterway. The forecast, published in Shell's annual LNG Outlook 2026, assumes shipping through the strait returns to normal levels this summer. "The conflict has triggered the largest energy shock in history, but a combination of U.S. supply, stored inventory and fuel switching has kept prices well below 2022 levels," Shell said in the report. U.S. LNG exports rose about 10 million tons year-on-year in the January-to-May period, while Qatar's exports fell by nearly 20 million tons from a year earlier, Shell said. Monthly U.S. shipments to Asia surged from under 1 million tons in January to more than 4 million tons in May as Asian buyers scrambled for alternative supply. Asian benchmark gas prices peaked at $21.63 per million British thermal units during the crisis, while European Dutch TTF contracts topped out at $18.33 per MMBtu — both far below the 2022 highs when TTF hit $71.55 per MMBtu after Russia's invasion of Ukraine. If the Strait of Hormuz disruption continues through the remainder of the year, global LNG supply could see a rare annual contraction, Shell said. The U.S. and Iran exchanged fire over the weekend, though the two sides are expected to resume peace talks as soon as Tuesday. Prior to the conflict, Shell had expected global LNG sales to increase significantly over 2026. **U.S. Supply Emerges as Critical Lifeline** The crisis has reshaped global LNG flows. Around 15 million barrels of oil equivalent a day dropped out of global supply during the worst month of the conflict, Shell said. U.S. exports have filled part of the gap, with American projects accounting for close to 60 percent of continuing LNG liquefaction developments worldwide, according to the International Energy Agency. Qatar holds about 15 percent of projects under development. The war in the Middle East upended earlier growth projections, leaving cargo-laden ships unable to exit the Strait of Hormuz and damaging energy infrastructure in the region. Despite the supply shock, stored inventory and fuel switching have helped keep global gas prices well below 2022 levels, Shell said. **Long-Term Demand Outlook Remains Bullish** Despite the near-term disruption, Shell projects global LNG demand will rise about 65 percent from 2025 levels to nearly 700 million tons a year by 2050. South and Southeast Asian countries will account for roughly 40 percent of global imports by that time, driven by growing populations and power demand from data centers. To meet that demand, Shell estimates about 200 million tons a year of new liquefaction capacity will be needed on top of projects already under construction. The last time the industry faced a comparable supply-demand imbalance was in the early 2010s, when a wave of U.S. Gulf Coast LNG projects came online to meet Asian demand following the Fukushima disaster. This article is for informational purposes only and does not constitute investment advice.
Shell warned global LNG supply could contract if the Strait of Hormuz disruption persists, reversing its pre-conflict expectation of significant sales growth in 2026 as the waterway's paralysis enters a fourth month. "Prolonged disruption to transit through the Strait of Hormuz risks a contraction in global LNG supply this year," Shell said in a statement, without providing specific volume estimates. The warning comes as Brent crude traded near $73 a barrel Monday, close to pre-war levels, even as the market faces a chaotic rebalancing. Ship-tracking data from LSEG shows that for every four tankers leaving the Persian Gulf last week, only one entered — far below the roughly 125 daily crossings before the conflict. A sustained contraction in LNG supply would compound energy security concerns across Asia and Europe, where buyers already scrambled to secure alternative cargoes after the waterway — which carried about a fifth of global oil and gas — was effectively shut for more than 100 days. The Strait of Hormuz, a 21-mile-wide chokepoint between Oman and Iran, handled about 20% of global LNG shipments before the U.S.-Iran conflict erupted on Feb. 28. The waterway's closure stranded dozens of tankers inside the Gulf and forced buyers from Japan to Germany to tap storage and seek spot cargoes from the U.S. and Qatar via alternative routes. Shell's warning highlights the fragility of the recovery. While flows briefly exceeded pre-war levels of about 20 million barrels of oil equivalent per day last week, according to U.S. Energy Secretary Chris Wright, overall traffic remains depressed. Some vessels are disabling tracking systems during transit, further clouding the picture, Reuters reported. ### Supply Glut Looms After Historic Shortage The market's rapid shift from shortage to potential surplus complicates the outlook. Global oil supply is forecast to fall by 3.9 million barrels a day in 2026 but rebound by about 8 million barrels a day in 2027 to roughly 110.3 million barrels a day, according to the International Energy Agency. Demand is expected to recover far more modestly, creating a potential surplus of about 5 million barrels a day next year. Iran's expected ramp-up adds to the supply overhang. Tehran could reach output of 3.3 million barrels a day by year-end, above pre-conflict levels, if the U.S. sanctions relief stays in place, according to Rystad Energy. The consultancy estimates shut-in production across the Gulf fell to 9.6 million barrels a day by mid-June from 11.7 million barrels a day three weeks earlier, with a full return to pre-war output expected by December. For LNG specifically, the risks are acute. Qatar, the world's largest LNG exporter, relies almost entirely on the Strait of Hormuz for shipments. Any sustained disruption would force Asian buyers — which account for more than 70% of global LNG demand — to compete for a shrinking pool of Atlantic Basin cargoes, pushing spot prices higher. ### Lingering Risks Cloud the Recovery The U.S.-Iran interim deal guarantees unimpeded transit through the strait for 60 days while Tehran negotiates a longer-term framework with Oman. But recent tit-for-tat strikes — including Iranian forces firing on a Taiwanese cargo vessel on Thursday and subsequent U.S. retaliatory strikes — signal that Tehran intends to assert its authority through the newly created Persian Gulf Strait Authority. "After months of severe disruption, the road back to balance is unlikely to be smooth," Reuters columnist Ron Bousso wrote Monday. "That suggests today's market optimism might be overdone." The contango structure in Brent futures — where August contracts traded below September for the first time since the war began — could persist for several weeks as the backlog of trapped oil clears. But once flows normalize, the market will require enormous volumes to refill inventories depleted during the conflict, potentially tightening conditions again by year-end. This article is for informational purposes only and does not constitute investment advice.
BP Plc shares dropped to 472 pence on Friday, down 22% from their 2026 high, while Shell Plc slipped to 2,900 pence from a year-to-date peak of 3,592, extending a selloff that has deepened through the second quarter. "Energy stocks are being repriced as the market weighs the risk of sustained lower crude prices against the sector's still-strong cash flows," said Omar Tariq, an energy analyst covering European majors. "The magnitude of the decline in BP and Shell suggests investors are pricing in a structural shift, not just a cyclical downturn." BP's decline to 472p marks its lowest close since Feb. 27, accelerating a slide that has erased roughly a quarter of the gains the stock had built in the first two months of the year. Shell's drop to 2,900p represents a 19% retreat from its 2026 peak of 3,592p, with both stocks now trading at levels not seen in four months. The selloff in Europe's two largest oil companies carries implications for the broader FTSE 100, where energy stocks account for roughly 12% of the index weighting. A sustained decline could weigh on the benchmark's performance through the third quarter, particularly if crude prices fail to find a floor. The rout comes as the energy sector faces headwinds on multiple fronts. Brent crude prices have softened in recent weeks as concerns over global demand growth mount, while regulatory pressures in Europe have intensified. BP and Shell have both outlined energy transition strategies that require significant capital investment, creating tension between near-term shareholder returns and long-term repositioning. ## A Four-Month Slide Accelerates The current downturn marks the most sustained period of weakness for London-listed oil majors since the broader energy selloff of 2024. BP shares have now given back all of their gains from the January-February rally, when the stock briefly touched 605p. Shell's trajectory mirrors that pattern, with the shares unable to hold above the 3,500p level since early March. This article is for informational purposes only and does not constitute investment advice.