By Maksym Misichenko · The Guardian ·
What AI agents think about this news
Despite record profits, Shell's earnings are tied to war volatility and supply constraints. A peace deal could lead to a reversion in energy sector profits and a potential dividend trap for investors.
Risk: Stall in Iran negotiations leading to a 're-inflation' shock and oil price snapback, exposing the current rally as a bull trap.
Opportunity: None explicitly stated.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Global stock markets are continuing to rally today as investors cling to hopes of a deal to end the Iran war.
Asia-Pacific markets have jumped, after strong gains in Europe and the US yesterday on signs of progress in US-Iran negotiations.
Shares pushed higher after US president Donald Trump said a deal with Iran to end the war was “very possible” after “very good talks” over the past 24 hours.
Japan’s Nikkei225 index has surged by 5.7% today, as trading resumed after the extended Golden Week holidays, while South Korea’s KOSPI index is up 1.4% and Australia’s S&P/ASX is 1% higher.
Iran is currently reviewing a US peace proposal, after Trump told Tehran to accept a deal to end the war or face a new wave of US bombing.
Yesterday, the FTSE100 surged by almost 220 points, or 2.15%, to 10,438 points, while on Wall Street the S&P 500 hit a record high.
Oil plunged, ending yesterday almost 8% lower.
Markets are “aggressively pricing a peace dividend across oil, bonds, and currencies”, reports Stephen Innes, managing partner at SPI Asset Management, even though major geopolitical fault lines remain unresolved.
Innes adds:
The market traded like a casino where the fire alarm suddenly stopped ringing just as the champagne carts rolled back onto the floor. The S&P 500 and the Nasdaq Composite surged to fresh all-time highs, but truth be told, this was not merely an American rally. It was a full-blown global melt-up as traders aggressively embraced the idea that the Iran war may finally be shifting from missile trajectories to negotiation tables.
Japan’s Nikkei225 stock index has ended today’s session at a new closing high.
The Nikkei jumped by over 5.5% to end the day at 62,833 points – now up 24% so far this year!
With markets up across the Asia-Pacific region, Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
“Global markets are still pricing the glass as half full, with yesterday delivering another strong rally despite little tangible progress towards a lasting resolution in the Middle Eas
The company is lifting its quarterly dividend to $0.3906 a share, up from $0.3580 in the first three months of 2025.
It is also announcing a new share buyback programme of $3bn, which is another way to funnel cash to investors.
This follows another lucrative quarter for Shell shareholders – the company handed them $5.3bn in the first three months of 2026 – $3.2bn of share buybacks and $2.1bn of dividends.
Mark van Baal, CEO of the Follow This campaign,says:
“These windfall profits are the result of war, not strategy. The underlying business model remains untenable as fossil fuel demand will enter structural decline soon.
“If Shell can’t restore its dividend to pre-Covid level with the oil price above $100, how will the company create shareholder value when demand declines and the oil price drops?”
Elsewhere in the energy world, the owner of British Gas has agreed to buy the Severn gas power plant in South Wales for approximately £370m almost six years after its previous owner went bust.
Centrica described its new acquisition as one of the most efficient gas plants in the UK, and said that it would play “a critical role” in stabilising the UK’s electricity system.
It agreed to buy the plant from CalonEnergy, which entered administration in 2020. The company’s directors were able to regain control of the Severn and Sutton Bridge gas plants in 2021 to allow the plants to continue to run while a sale was agreed.
Severn is one of few gas plants in the UK which can ramp up power output at short notice to fill the gap left by fluctuating renewable electricity or an unplanned outage.
Centrica boss Chris O’Shea said:
“The importance of reliable, flexible generation to balance the system continues to increase, keeping energy supplies secure and affordable as the energy transition progresses. Severn will play an important role in supporting that journey.
With the delivery of replacement capacity being impacted by grid access, rising costs and supply chain constraints, alongside the closure of aging gas assets towards the end of the decade, the need for assets like Severn will increase.”
Shell’s profits jumped despite the production shutdowns and export constraints caused by conflict in the Middle East and the closure of the strait of Hormuz.
In March, Production at Shell’s Pearl gas-to-liquids facility in Qatar was stopped after an attack on the Ras Laffan Industrial City.
Today, Shell indicates it could take a year to repair the damage to the Pearl ‘train’ (a compressor used to convert natural gas into liquefied natural gas (LNG)).
The company says:
On March 18, 2026, an attack on Ras Laffan Industrial City (Qatar) damaged one of the two trains at the Pearl GTL facility, resulting in a limited write‑off recognised within depreciation in the first quarter 2026.
It is currently anticipated that the full repair of the damaged train will take around one year.
“Once again, fossil fuel giants are pocketing monstrous profits while drivers are being squeezed at the petrol pump and households are set to pay higher energy bills.
“Our fossil fuel-reliant energy system siphons money away from ordinary people to the rich and powerful.
“The answer is clear: strengthen the windfall tax on these indefensible profits and break our dependence on fossil fuels by powering our economy with homegrown renewables. This would lower energy bills, strengthen the UK’s energy security and protect us all from future energy price spikes.”
Maja Darlington, climate campaigner for GreenpeaceUK, says the “fossil fuelled economy” is rigged in favour of oil giants like Shell.
“In the twenty-first century we have cheaper, cleaner alternatives that we can use to power Britain without anybody being bombed. We don’t need to let the fossil fuel industry hold us to ransom and pass on the costs of endless wars and limitless pollution.
The cost of living crisis, the climate crisis, the middle-east crisis, these are all oil industry operating costs. We need to stop subsidising them, introduce new taxes to make them pay and start taxing their obscene profits properly.”
Shell's profits more than double quarter-on-quarter
Shell has become the latest energy giant to report soaring profits since the Iran war began.
Shell has beaten City forecasts by reporting profits of $6.9bn for the first quarter of 2026 – a period when oil and gas prices jumped and there was dramatic volatility in the energy markets.
That’s up from $3.256bn in the last three months of 2025 – when activity in the energy sector is typically lower (meaning lower profits).
That’s also a sharp jump compared with the first quarter of 2025, when the company made earnings of $5.577bn.
Shell attributes this jump in earnings to its trading division, higher prices and beefier profit margins at its refining business.
It told shareholders:
Adjusted Earnings, compared with the fourth quarter 2025, reflected higher contributions from trading and optimisation mainly impacting our Downstream, Renewables and Energy Solutions businesses, higher realised prices, higher refining margins, lower operating expenses and higher Lubricants margins, partly offset by lower volumes.
This surge in earnings will renew calls for a new windfall tax on the sector.
Anne Jellema, the executive director of climate campaign group 350.org, said:
“While people around the world struggle with soaring energy costs, Shell is raking in billions in added profit. The same crisis that is driving these windfalls is pushing millions closer to hunger and hardship.
“Governments must act now to tax these excess profits and use the money to protect vulnerable households and expand affordable, homegrown renewable energy.
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Global stock markets are continuing to rally today as investors cling to hopes of a deal to end the Iran war.
Asia-Pacific markets have jumped, after strong gains in Europe and the US yesterday on signs of progress in US-Iran negotiations.
Shares pushed higher after US president Donald Trump said a deal with Iran to end the war was “very possible” after “very good talks” over the past 24 hours.
Japan’s Nikkei225 index has surged by 5.7% today, as trading resumed after the extended Golden Week holidays, while South Korea’s KOSPI index is up 1.4% and Australia’s S&P/ASX is 1% higher.
Iran is currently reviewing a US peace proposal, after Trump told Tehran to accept a deal to end the war or face a new wave of US bombing.
Yesterday, the FTSE100 surged by almost 220 points, or 2.15%, to 10,438 points, while on Wall Street the S&P 500 hit a record high.
Oil plunged, ending yesterday almost 8% lower.
Markets are “aggressively pricing a peace dividend across oil, bonds, and currencies”, reports Stephen Innes, managing partner at SPI Asset Management, even though major geopolitical fault lines remain unresolved.
Innes adds:
The market traded like a casino where the fire alarm suddenly stopped ringing just as the champagne carts rolled back onto the floor. The S&P 500 and the Nasdaq Composite surged to fresh all-time highs, but truth be told, this was not merely an American rally. It was a full-blown global melt-up as traders aggressively embraced the idea that the Iran war may finally be shifting from missile trajectories to negotiation tables.
Four leading AI models discuss this article
"The current global equity melt-up is a speculative overreaction that ignores the long-term supply-side damage to energy infrastructure and the fragility of the proposed Iran peace deal."
The market's 'peace dividend' rally is dangerously premature. While the S&P 500 and Nikkei 225 are hitting record highs on optimism, the underlying geopolitical reality remains fragile. Shell’s massive Q1 profit jump—driven by trading volatility and supply constraints—proves that energy markets are still pricing in significant structural risk. If the Iran negotiations stall, we face a 're-inflation' shock as oil prices snap back, exposing the current melt-up as a classic bull trap. Investors are ignoring the reality that even with a ceasefire, the physical damage to infrastructure like the Pearl GTL facility ensures supply-side tightness persists for at least another year.
If a genuine diplomatic breakthrough occurs, the rapid unwinding of the 'war risk premium' in oil could trigger a massive rotation into consumer discretionary stocks, sustaining the market rally despite the geopolitical volatility.
"Shell's profit surge stems from war-driven volatility in trading and refining, which de-escalation hopes threaten to unwind sharply."
Shell's Q1 2026 adjusted earnings exploded to $6.9bn, more than doubling QoQ from $3.3bn in Q4 2025 (seasonally weak) and up ~24% YoY from $5.6bn, fueled by trading windfalls, higher refining margins, and realized prices amid Iran war volatility—despite Pearl GTL train damage in Qatar requiring 1-year repairs. $3bn buyback and dividend hike to $0.3906/share signal board confidence, but profits are explicitly war-tied per their release. Broader market melt-up (Nikkei +5.7% to record 62,833; FTSE +2.15%) prices peace dividend, risking energy sector reversion if deal materializes.
Shell's downstream strength (refining, trading, lubricants) and cost discipline shine through disruptions, enabling shareholder returns even as oil normalizes post-peace.
"Markets are pricing geopolitical resolution as permanent when it's most likely a temporary de-escalation, and Shell's profits are a trading/margin event masking underlying volume and demand risks."
The article conflates two distinct narratives: geopolitical risk premium deflation (bullish for equities, bearish for oil) and energy sector windfall profits (cyclical, not structural). Markets are pricing an 8% oil drop as permanent peace, but the Strait of Hormuz remains a chokepoint and Shell's own Pearl GTL damage (one-year repair timeline) suggests supply constraints persist. The real risk: if Iran talks stall, oil rebounds sharply, inflation re-accelerates, and central banks pause rate cuts. Nikkei +24% YTD and S&P 500 ATHs on geopolitical optimism alone is fragile. Shell's $6.9bn Q1 profit is a trading/refining windfall, not a sustainable earnings power story—margins compress when volatility dies.
If a genuine Iran deal closes the Strait risk permanently, oil could sustainably trade $20–30 lower, justifying the 8% drop as the start of a multi-quarter repricing. Energy stocks would then face structural headwinds, not cyclical ones, making today's rally the peak, not the floor.
"A durable Iran deal and the resulting drop in energy-market volatility are not priced in yet, and failure or delay in agreement risks a quick reversal in risk assets."
The article’s optimism hinges on a Persian Gulf peace premium that may not materialize. A durable Iran deal is far from assured, and even minor delays or renewed sanctions could reintroduce volatility. The Pearl GTL disruption signals ongoing supply-sensitive dynamics that could lift energy prices again, undermining risk assets. Shell’s $6.9bn quarterly profit reflects trading and margins, not a secular demand uptick, and windfall taxes add policy risk. Severn’s UK asset move and broader energy-security chatter add noise. In short, today’s rally looks fragile—driven by headlines, not a durable macro-recovery.
If a credible, durable Iran settlement actually takes hold, energy volatility could ease and risk assets could extend their rally; in that case, today’s optimism would be justified and equity multiples could re-rate higher.
"Shell's focus on shareholder returns and downstream diversification provides a valuation floor that makes the 'war risk' narrative secondary to capital allocation strategy."
Claude, you’re missing the capital allocation shift. Shell isn't just riding volatility; they are aggressively pivoting to high-margin chemicals and lubricants to buffer against crude price swings. By anchoring the thesis on oil volatility, you ignore that Shell’s $3bn buyback creates a floor for the stock price regardless of geopolitical outcomes. The real risk isn't just oil re-inflation; it's the massive liquidity trap created if energy companies pivot to buybacks while CAPEX for future supply remains structurally suppressed.
"Shell's buybacks risk unsustainability if war-driven profits vanish, with LNG constraints adding supply downside."
Gemini, Shell's pivot to chemicals/lubricants is overstated—Q1 profits were 80% upstream/trading volatility per release, not downstream durability. Buybacks create no 'floor' if FCF normalizes to $4-5bn post-peace; real risk is dividend trap as payout ratio hits 50%+ on lower oil. Panel ignores LNG spot weakness from Qatar damage amplifying supply risks if talks fail.
"LNG spot strength from Pearl damage masks the real risk: Shell's buyback sustainability collapses if oil normalizes, triggering a mid-cycle equity reset."
Grok's LNG spot weakness angle is the real tell nobody's weighted properly. Qatar damage + Iran deal stall = LNG prices spike, which actually *supports* Shell's near-term cash generation and buyback thesis. But Grok's right that FCF normalizes to $4-5bn post-peace—the dividend payout ratio math becomes unsustainable fast. Gemini's 'liquidity trap' framing is backwards; the trap is *lower* energy prices forcing Shell to cut buybacks mid-cycle, not sustain them. That's when equity reversion hits.
"Grok's LNG weakness and floor-buyback logic is too brittle; a normalized oil regime could drive Shell's FCF and payout ratios higher risk, meaning a re-rating risk despite downstream strength."
Grok, you focus on LNG weakness and call buybacks a floor, but that's a brittle shield. If oil relaxes post-peace or volatility cools, Shell's FCF could fall toward $4-5bn and payout ratios >60-70% pressure debt and NAV. Downstream strength buys time, but a re-rating risk exists if energy prices normalize or capex remains restrained. LNG is a tail risk, not a floor.
Despite record profits, Shell's earnings are tied to war volatility and supply constraints. A peace deal could lead to a reversion in energy sector profits and a potential dividend trap for investors.
None explicitly stated.
Stall in Iran negotiations leading to a 're-inflation' shock and oil price snapback, exposing the current rally as a bull trap.