Oil stocks rally but face risk if Middle East ceasefire eases supply tensions

European oil giants like Shell and BP have seen strong stock gains in 2026 due to high crude prices and Middle East tensions disrupting supply. JPMorgan notes these stocks are now fairly valued and vulnerable if a ceasefire leads to eased tensions and reopened shipping routes like the Strait of Hormuz. While current cash flows remain strong, investors should watch how producers convert profits into shareholder returns. Citi also highlights tight inventories in Asia that could keep prices elevated even if supply normalizes later this year.