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
Snap analysis: a blow to Opec, but a boost to Trump?
The UAE’s decision to quit Opec is a blow to the group, but could potentially please the White House.
Under normal times, Opec’s production quotas restrict how much oil a member state can sell on the markets. Once the UAE has left, it will be free to pump more – which could push down prices.
Of course, that’s not a factor until the strait of Hormuz is reopened.
But it could put downward pressure on prices in the long term. Back in 2018, President Donald Trump on Friday accused Opec of keeping oil prices artificially high, by restraining how much oil was being released onto the markets.
Opec hasn’t always managed to stay united. In March 2020 they failed to agree production cuts when the Covid-19 pandemic hit the world economy, before agreeing a deal the next month.
Opec currently includes 12 members, including Iran, Iraq, Saudi Arabia and Kuwait. The current Middle East conflict has created tensions within the group.
In March, Iran launched a successful drone attack on the UAE’s Shah gas field, and also attacked the United Arab Emirates port of Fujairah – which lies just outside the strait of Hormuz, while its other export hubs are located within the Gulf.
Tensions have also been growing between the UAE and Saudi Arabia, which is the dominant player within Opec. The two countries have been supporting different groups in Yemen – culminating in Saudi Arabia bombing what it said was a shipment of weapons for Yemeni separatists that had arrived from the UAE in December.
The UAE insists it has been a loyal member of Opec, saying:
During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all.
However, the time has come to focus our efforts on what our national interest dictates and our commitment to our investors, customers, partners and global energy markets.
UAE quits Opec group
Newsflash: The United Arab Emirates has announced it is quitting the Opec group of oil producers.
In an unexpected move, the UAE is leaving Opec and Opec+ (which includes allies such as Russia) from 1 May, a move which could allow it – in theory – to produce more oil and gas.
The UAE’s energy ministry says in a statement that the decision “reflects the UAE’s long-term strategic and economic vision and evolving energy profile”, and follows a “comprehensive review” of its production policy, and its current and future capacity.
Opec, created back in 1960, agrees and sets production quotes for members in an attempt to control the oil price. The UAE is a long-standing member, having joined in 1967.
The UAE pledges to “act responsibly” after it quits Opec, saying it will bring “additional production to market in a gradual and measures manner” in line with demand and market conditions.
In the short-term, though, the UAE – like many Opec members in the Gulf – faces the serious challenge of the blockade on the strait of Hormuz (many of the UAE’s oil export hubs are within the Gulf).
UK government borrowing costs approaching highest since 2008 crisis
UK government borrowing costs are heading towards their highest levels since the financial crisis in 2008, as the Iran war drags on.
The yield, or interest rate, on 10-year UK gilts has risen to 5.02% so far today, up 5 basis points (0.05 percentage points), approaching the 18-year high of 5.11% hit on 23 March.
That’s broadly in line with other government bond moves – the yield on US 10-year Treasury bonds is up 3 basis points to 4.36%.
The yield on German 10-year debt, usually a safe haven, is also up 4bps. Yields rise when prices fall.
The jump in the oil price is threatening to destabilise government finances – weaker economic growth will hurt tax revenues, while any energy support packages might add to government borrowing.
Overnight, investment group BlackRock warned that higher government bond yields are “here to stay” as the Iran war puts upward pressure on inflation.
The weakness in UK government bonds may also reflect political stability, as prime minister Keir Starmer faces the threat of a standards investigation into his decision to appoint Peter Mandelson as ambassador to the US. His former chief of staff, Morgan McSweeney, is testifying about the issue today.
Rachel Reeves also pledged to do everything possible to help people renting their homes in the private sector.
After the Guardian reported this morning that the chancellor is considering a one-year freeze on rent increases, she told MPs:
“I will do everything in my power and use every lever we have to bear down on the cost of living, including for people in the private rented sector.”
Bloomberg are reporting that Saudi Aramco is suspending liquefied petroleum gas shipments next month after damage to its main export facility in late February – just before the Iran war began – cut off supplies of the fuel.
The state producer informed buyers recently that shipments from the Juaymah LPG facility would continue to be suspended through May, “according to people familiar with the matter”.
Shipments from Juaymah were halted in the week before the US-Israeli bombing of Irann began, after a part of the delivery system carrying propane and butane was structurally damaged.
Juaymah is on the Saudi coastline in the Gulf, so shipments would be disrupted anyway by the closure of the strait of Hormuz….
Reeves: Important to keep windfall tax on oil and gas companies
Chancellor Rachel Reeves is pledging to stick with the current windfall tax on oil and gas companies in the UK.
Asked about BP’s surge in profits, at Treasury questions in Parliament today, Reeves says the Energy Profits Levy allows the government to tax some of the profits made by energy giants during the Iran war.
The chancellor tells MPs:
The oil and gas sector will play an important part in our energy mix for many years to come, and we need to support them, as we are for example through tiebacks.
But it is important that the energy profits levy remains in place for now. During this conflict we will be able to capture the profits made in the UK through the windfall tax.
The Conservatives and Reform oppose this tax, and this would simply mean even higher profits for the oil and gas industry.
The Energy Profits Levy is 38%, lifting the headline rate of tax on upstream oil and gas activities to 78%. It only applies to a company’s earnings within the UK, though, and doesn’t catch profits made in the rest of the world.
GM: Tariffs will cost us $500m less after Supreme Court ruling
US carmaker GM has lifted its profit forecasts, after Donald Trump’s Supreme Court defeat over his sweeping tariffs.
GM has lifted its guidance for adjusted EBIT (earnings before interest and tax) this year, after “a favorable adjustment” of approximately $500m resulting from the ruling that tariffs claimed under the International Emergency Economic Powers Act were unlawful.
GM now expects gross tariff costs of $2.5bn to $3.5bn in 2026, down from the original estimate of $3.0bn to $4.0bn.
Earlier this month, the Trump administration began accepting applications from businesses seeking refunds for more than $166bn in tariffs, after the supreme court ruled in February that the president had no legal authority to impose them.
NatWest chair: we believe deeply in UK’s long-term strengths
NatWest’s AGM is up and running again, after that earlier disruption, and chair Rick Haythornthwaite is telling investors that the UK’s economy still has “long-term” strengths.
Haythornthwaite says:
Over recent years, uncertainty and volatility have been a persistent feature of our operating environment. Growth is present, but it is uneven. It varies by sector, by region and by levels of financial resilience, and it demands discipline and selectivity. What has been striking over the past year is that behaviours have often proved more resilient than sentiment. Across households and businesses, people continue to plan, invest and adapt, even in the face of uncertainty, but with greater discipline and a renewed focus on returns and value for money.
We should be clear: there are near-term challenges. Recent global events mean pressures have elevated for many households and businesses. From a Board perspective, maintaining a longer‑term view is essential, and we believe deeply in the long-term strengths of the UK.
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.”