Key Takeaways
- BP’s share price rally is being driven by higher oil prices, but earnings remain sensitive to volatility.
- The pivot back to oil and gas could support returns, though BP still trails Shell.
- Shares appear overvalued versus fair value, with high uncertainty limiting near-term upside.
Ollie Smith: With crude oil prices rocketing and global economic expectations upended by the Iran war, a pivot back towards oil and gas by London-listed energy giant BP BP looks well-timed.
BP is one of two oil and gas majors listed in the UK capital—alongside larger rival Shell SHEL. Year to date, BP stock has climbed 38.63%, positioning it for its best annual gain since 2022, when it climbed 43.69%. That places it among the top-performing stocks in the Morningstar Europe Index this year.
Why Is BP Stock Rising in 2026?
In 2022, when the world was rocked by a post-pandemic inflationary surge and an energy crisis exacerbated by the Russian invasion of Ukraine, BP posted record profits.
Since then, its numbers have been on the slide, a trend that led the company to pivot away from renewables and back towards fossil fuel investments last year. As Morningstar director of equity research Allen Good puts it: “Investors should welcome this, but BP is still behind peers like Shell, which made the same decision a few years ago.”
More recently, in February, the company suspended its share buyback programme to shore up its balance sheet, though it kept its dividend, which, at GBP 3.9 billion, is still expected to be among the 10 biggest UK distributions to investors in 2026.
Morningstar’s Good says the company’s pivot back towards oil and gas should result in stronger long-term performance. So will the additional prospect of a global oil crisis be a headwind or a tailwind for the company overall? And is the company’s stock a buy right now?
Should I Buy Shares in BP Right Now?
BP’s exposure to rising commodity prices may look good, but it’s also part of what makes its future so unclear. Morningstar’s Good says that BP stock has a Morningstar Uncertainty Rating of High. That’s thanks to production largely being tied to hydrocarbons and highly leveraged to oil price movements. In addition, project cost overruns and delays in project completions compound this picture of doubt for investors.
The company also lacks an economic moat because of this future uncertainty.
What’s more, BP stock is currently significantly overvalued. At around GBP 6 each, shares in BP are currently trading well above Morningstar Fair Value Estimate for BP stock of GBP 4.70. A possible takeover premium may also be baked into that valuation. Overall, this makes BP a two-star stock. Investors will just have to wait and see if there’s more bad news in the pipeline to come. For Morningstar, I’m Ollie Smith.
