Introduction: BP profits double as Iran war drives up energy prices
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The Iran war has helped BP to double its profits in the first quarter of this year, its latest financial results show.
The oil major has just reported that it made a profit of nearly $3.2bn in the first three months of 2026, on its favoured ‘underlying replacement cost’ earnings measure.
That’s higher than City analysts had predicted, with BP – which was hit by a shareholder rebellion last week – giving some of the credit to an “exceptional” contribution from its oil trading operations.
These quarterly profits are up from $1.54bn in the fourth quarter of 2025, and $1.38bn in the first quarter of last year.
Q1 2026 includes the surge in oil and gas prices in March, after the war began at the end of February, disrupting energy supplies from the region.
BP’s new CEO, Meg O’Neill, acknowledges the impact of the Middlle East conflict, saying the company is working in an “environment of conflict and complexity”.
O’Neill says BP is “working with customers and governments to get fuel where it’s needed” – at a time when fears of jet fuel shortages are growing.
She adds:
Overall, our business continues to run well. This was another quarter of strong operational and financial delivery, and we made further progress towards our 2027 targets. We had high plant reliability, high refining availability and increased production in the Gulf of America and at bpx Energy, our US onshore business – keeping production levels steady despite the ongoing disruption.
The surge in energy prices is worrying central banks, many of whom are setting interest rates this week.
Overnight, the Bank of Japan left borrowing costs unchanged, but three policymakers did break ranks and vote for a hike….
The agenda
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9am BST: ECB survey of Consumer Inflation Expectations in the eurozone (timing corrected)
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2pm BST: US house price data: S&P/Case-Shiller Home Price MoM
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3pm BST: US consumer confidence data
Key events
NatWest AGM disrupted
Over in Edinburgh, NatWest bank has begun its annual meeting with shareholders, and then briskly adjourned it.
There was some shouting, and then some singing, audible on the live feed from the AGM before it was suspended – for 15 minutes, although it’s been longer now….
Campaign groups had already called for protest votes against the bank’s chair, Rick Haythornthwaite, today, amid accusation of ‘climate backtracking’ by the bank.
Reuters are reporting that climate protesters disrupted the meeting, according to a spokesperson.
BP’s profit surge in the first quarter of this year probably won’t last, due to the disruption to energy infrastructure since the Iran war began, predicts Kathleen Brooks, research director at XTB.
After BP reported results that “smashed expectations”, Brooks says:
In fairness, an oil major that makes bags of money during an energy price shock should not be a surprise. Its share price was higher by 3%, after it reported profits of $3.8bn, driven by strong oil trading revenue.
This is a good start for new CEO Meg O’Neil, but the question is, will it last? The answer is most likely no, as the company also noted flat production levels due to disruption at its sites in the Middle East.
UK grocery inflation slows
UK grocery inflation has slowed this month, new data shows, despite the disruption caused by the Iran war.
Worldpanel by Numerator has reported that like-for-like grocery inflation fell to 3.8% in the four weeks to 19 April, which is the lowest rate in a year.
Prices are rising fastest in markets such as medicines & treatments, fresh unprocessed meat and fresh unprocessed fish, and are falling fastest in chilled butter & spreads, sugar confectionery and household paper.
The survey found that shoppers are seeking out deals due to concerns about rising prices – spending on promoted items rose by 7.8% year on year.
Fraser McKevitt, head of retail and consumer insight at Worldpanel by Numerator, explains:
“Concerns about the impact of the Middle East conflict on prices of everyday goods are front of mind for British households. Already feeling the squeeze at the petrol pump, shoppers are responding by turning to special offers in growing numbers when buying groceries.”
Bloomberg: Japanese crude oil supertanker attempting to sail through strait of Hormuz
A laden Japan-linked supertanker appears to sailing through the Strait of Hormuz, in what may be the first attempt by an oil carrier from the country to leave the Gulf since the Iran war began.
Bloomberg has the details:
The Idemitsu Maru began sailing late Monday toward the strait from northwest of Abu Dhabi, where it had idled for more than a week, tracking data show.
It appeared to turn north toward Iran’s Qeshm and Larak Islands, then sail past Larak toward the eastern side of the strait. It’s carrying 2 million barrels of crude loaded from Saudi Arabia’s Juaymah terminal in early March.
At the start of April a liquefied natural gas tanker co-owned by the Japanese company Mitsui OSK Lines sailed through the strait.
Tax Justice UK: Profiteering companies should face additional excess profits taxes
The UK government should ‘get a grip’ on energy companies, banks or weapons makers who make excessive profits from the Iran war, and tax those earnings, says Caitlin Boswell, deputy director at Tax Justice UK.
“It is outrageous that households are getting hammered on all sides from rising bills and prices of essentials, while companies like BP are doubling their profits, all from the same crisis. The government needs to get a grip on the situation to stop companies from callous profiteering, whether in the energy sector, banking or defense.
We need the government to remain steadfast in maintaining the windfall tax on oil and gas companies, and apply additional excess profits taxes on those profiting from the crisis. That way, the government can recoup all unearned profits to help people get through the affordability crisis and make the UK more resilient to future shocks.”
Eurozone inflation expectations have jumped
The surge in energy prices since the Iran war began has pushed up inflation expectations across the eurozone.
New data from the European Central Bank this morning shows that median inflation expectations for the next 12 months and for three years ahead have “increased significantly” this month.
The ECB says:
In March, the median rate of perceived inflation over the previous 12 months increased to 3.5%, from 3.0% in February.
Median expectations for inflation over the next 12 months and expectations for inflation three years ahead, which both stood at 2.5% in February, increased in March to 4.0% and 3.0% respectively.
Central banks such as the ECB will use inflation expectations for signs that the jump in energy prices is leading to ‘second round’ effects – higher prices for other goods, or higher wages. Its target is for inflation to run at 2% in the medium term.
The recent drop in UK mortgage rates seems to have stalled today.
Data provider Moneyfacts reports:
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The average 2-year fixed residential mortgage rate today is 5.80%. This is unchanged from the previous working day.
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The average 5-year fixed residential mortgage rate today is 5.70%. This is unchanged from the previous working day.
Mortgage rates are still much higher than at the start of March – when the average 2-year fix was 4.83%, and the average 5-year fix was 4.95%.
But they’re lower than the peak on 12 April, when average two-year fixed-rate mortgage were 5.9%, while five-year rates were 5.78% on average.
Consumer Voice challenges FCA compensation scheme for car finance scandal
A consumer group is taking the City watchdog to court in the hope of overhauling a £9.1bn compensation scheme that it claims massively shortchanges victims of the UK car loan scandal.
Consumer Voice has filed a legal challenge to the scheme, in an attempt to change the way compensation is calculated. It fears millions of consumers could otherwise be left out of pocket by hundreds of pounds per claim.
The Guardian reported last week that Consumer Voice was considering a legal challenge against the FCA’s redress programme, which was introduced because some drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024.
Consumer Voice has also accused the Financial Conduct Authority of designing a scheme that “protects the very firms that failed to follow the law and the rules when these loans were sold”.
Alex Neill, co-founder of Consumer Voice, says
“We support a redress scheme, but this one does not go far enough. Millions of drivers were overcharged through hidden and unfair commission, yet the FCA’s scheme risks leaving many of them missing out on hundreds of pounds they’re owed.
“People have already been let down once by lenders. They should not now be let down again by the regulator that is supposed to protect them. The FCA needs to fix the scheme to ensure it delivers fair and lawful compensation for drivers.”
Last week, the FCA defended its scheme, saying it was “the quickest, fairest way to compensate consumers”, and warning that a legal challenges could delay payouts for millions of people.
BoJ: Middle East conflict is big downside risk to growth
The head of Japan’s central bank has warned that the Iran war will threaten growth in the world’s fourth-largest economy.
Japan imports nearly all its crude oil for domestic consumption, meaning it is particularly vulnerable to supply disruption and higher prices.
Bank of Japan governor Kazuo Ueda told reporters (translation by Reuters):
“Given high uncertainty surrounding the Middle East conflict, the likelihood of achieving our forecasts has diminished. On the other hand, there is both big downside risk to growth and upside risk to inflation mainly for fiscal 2026. At present, it’s hard to judge the duration and impact on the economy and prices now. The BOJ wants to spend a bit more time scrutinising how the Middle East conflict affects the economy and prices, and whether growth and inflation risks could change.”
Ueda was speaking after the BoJ left interest rates on hold today in a 6-3 split, with three policymakers voting to raise interest rates.
He explained that the BoJ would need to tighten policy if inflation “clearly overshoots” its target, saying:
“We don’t see a strong chance of Japan experiencing a repeat of the 1970s-style oil shock. But one thing in common is that our policy interest rate is below levels deemed neutral to the economy. We will take that into account in guiding policy.”
Full story: BP profits more than double
Although BP enjoyed that ‘exceptional’ oil trading in the last quarter, it is not immune to the damage and destruction wreaked on facilities across the Gulf, warns Susannah Streeter, chief investment strategist at Wealth Club.
The second quarter of this year is set to be weaker due to the disruption, Streeter explains:
The Rumaila oil field in Southern Iraq which it operates as part of a partnership was first closed as a precaution and then struck by drones. Then there’s the overall disruption expected as cargoes mount up and the Strait of Hormuz remains closed. So, while volatile energy prices are set to continue to benefit the trading division, there’s going to be a tale of repair and maintenance costs to bear going forward.
There’s also still the huge uncertainty surrounding future transit through the Strait of Hormuz, with potential tolls still on the table, that’s once the tankers are able to navigate mines planted in the waterway.
Shares in some specialist lenders are dropping this morning, after the Guardian reported that Rachel Reeves is considering imposing a one-year rent freeze on private sector homes, to protect renters from the cost of living crisis.
OSB Group are down 4% and Paragon Banking has dropped by 2.6% – both companies provide buy-to-let mortgages, where demand could weaken if rent controls are brought in.
BP’s surging profits could lead to calls for tougher windfall taxes on the energy sector, suggests Mark Crouch, market analyst for eToro:
“BP’s first-quarter earnings offer a timely reminder of just how abruptly the pendulum can swing in the energy sector. Underlying profits jumped to $3.2 billion, boosted by a powerful mix of elevated prices and exceptional trading conditions, even as disruptions in the Middle East weighed modestly on operations. In many respects, BP has both absorbed and benefited from the same geopolitical tensions, with volatility once again proving a tailwind for an integrated major.
“Refining performance remains robust, and BP’s scale in trading and downstream is clearly being monetised at the right point in the cycle. Combined with shares having touched a 16-year high as recently as March, the market is already showing a greater willingness to back the UK supermajor. While net debt has crept up in the near term, BP’s commitment to deleveraging and disciplined capital allocation should provide a clearer path for shareholder returns.
“The political backdrop, though, remains hard to ignore. Stronger profits, particularly those linked to geopolitical disruption, are likely to revive calls for windfall taxes across Europe as household budgets get squeezed.
The UK already imposes one of the most aggressive regimes globally, leaving BP walking a fine line between capital discipline, shareholder returns and an increasingly complex fiscal backdrop.”
IG: BP walks a tightrope after profit bonanza
BP is walking “a tightrope” after its profit bonanza in the first quarter of the year, reports Chris Beauchamp, chief market analyst at investing and trading platform IG:
“BP’s surge in profits will have other sectors green with envy, but the situation gets trickier from here
Trump’s war has delivered a bonanza for the company and its shareholders, but it is uncomfortably aware that, while oil prices are likely to stay elevated, it is likely to face major disruption due to that same conflict. A lot of that might be offset by higher oil prices, and the shares have taken the optimistic view in early trading.”
Those BP shares are now up 2.8%, still leading the risers on the FTSE 100 share index this morning.
Some jobs saved as Prax Lindsey oil refinery sale completed.
Elsewhere in the energy industry, the sale of the Prax Lindsey oil refinery in north Lincolnshire to US energy company Phillips 66 has been completed.
Back in January, Phillips 66 struck a deal to buy the Prax site after the company collapsed into administration last summer, and integrate it with its nearby Humber refinery.
The deal will save some jobs at Prax.
Of the remaining employees at the sites, 109 have been retained by Phillips 66, and 55 will be made redundant, according to the Insolvency Service.
Official Receiver Gareth Allen says:
The sale of Lindsey Oil Refinery’s assets following a liquidation is the best possible outcome, and this is now complete.
My thanks to the team at the Insolvency Service and the special managers at FTI Consulting LLP.
I am grateful for the commitment, patience and understanding of the leadership team and employees at the site during this time.
