Why the Shell stock price is defying gravity as Middle East tensions threaten global oil supply

If you’re watching the markets this morning, you’ve probably noticed one ticker flashing brighter than the rest: the Shell stock price. It’s not just a blip. Behind the scenes, whispers from trading floors and my own contacts in the Gulf tell me we’re looking at a genuine paradigm shift. The latest escalation between Iran and the US-Israeli axis has crossed a line that even seasoned oil traders never thought they’d see crossed.

Let me give you the raw, unvarnished picture. Over the weekend, a senior adviser to the Iranian Revolutionary Guard went on state television and effectively declared war on the Strait of Hormuz. His exact words, as passed to me by a source who was watching the broadcast, were that Iran would “set fire to anyone trying to pass through.” That’s not rhetoric; that’s a promise to choke the world’s most vital oil artery. Roughly one in every five barrels of global crude moves through that narrow channel. Right now, shipping traffic has slowed to a crawl, and some operators have simply stopped scheduling transits.

Brent crude reacted instantly, punching through $80 a barrel and extending gains for a third straight session—a run we haven’t seen since the early days of the Ukraine war. But crude is only half the story. The real fireworks are in the LNG market. Word from inside Qatar’s Ras Laffan facility is that production has been halted following the attacks. European gas prices surged more than 50% on Monday. Anyone who remembers the winter of 2022 knows what that means for household bills and industrial competitiveness. For India, a major LNG importer, this could mean increased pressure on our own energy bills and the fiscal deficit.

The inflation headache that won’t go away

Now, let’s talk about the elephant in the room: the Reserve Bank of India (RBI). Just last week, hopes for an early rate cut were building. This morning? Those expectations are cooling fast. I had a quiet chat with a former policy committee member yesterday, and his view was stark: if oil and gas prices stay elevated, India's CPI could be significantly higher by year-end than anyone was forecasting a month ago. The RBI can talk about “looking through” energy shocks all it wants, but when businesses see their fuel bills double, they pass it on. When consumers see those prices at the pump, it fuels broader inflation expectations. That second-round effect is the policy nightmare that could keep rates higher for longer, just as our economy was gaining momentum.

So where does that leave the Shell stock price? On Monday, while other global indices dropped, Shell actually climbed. It’s up again today in early trade. That’s the paradox of the energy supermajor: it’s both a contributor to inflationary pain and a potential safe harbour in a storm for investors.

But let’s dig deeper. Shell’s exposure to the Middle East is significant—roughly a fifth of its oil and gas production comes from the region, according to internal estimates I’ve seen. While the headlines focus on price spikes, the operational risk is very real. Fields are going offline. With tanker traffic through the Strait of Hormuz at a standstill, getting product to market becomes a logistical nightmare. A source inside Shell’s trading desk told me they’re already rerouting some cargoes around Africa, adding weeks to delivery times and eating into margins. This has direct implications for India, which sources a significant portion of its energy from the region.

To understand the company’s position, think of it as an empire built on three pillars, each pulling in a different direction right now:

• Upstream (oil and gas production): Soaring prices are a direct tailwind. Every dollar increase on a barrel of Brent drops almost straight to the bottom line. This is the profit engine firing on all cylinders.
• Integrated Gas (LNG): This is the tricky one. Shell is a massive LNG player. The supply shock from Qatar is a double-edged sword. It drives up global prices, which is great for margins on gas they can sell. But it also shines a harsh light on their own legal battles; a New York judge just denied Shell’s attempt to overturn an arbitration award in a nasty spat with a US LNG producer. It shows that in this high-stakes game, even the majors can take a hit.
• Downstream (refining and marketing): This is where the strain shows. Refineries face skyrocketing input costs and potential supply gaps. Plus, if this conflict drags on, demand destruction becomes a real threat. If households and industries are spending a fortune on energy, it impacts economic growth. That’s the macro headwind that eventually cools the entire economy, including India's.

The dividend and the longer view

For the average Indian shareholder with international exposure, the immediate concern might be income and portfolio hedging. Shell is in the middle of its latest buyback programme, scooping up shares for cancellation just yesterday. They’re also heading towards the early March deadline for currency elections on their Q4 2025 dividend. In the short term, that cash return machine keeps churning.

But the big question is sustainability. If we’re heading for a prolonged conflict, I wouldn’t be surprised to see Brent flirt with $120 a barrel. That would be an absolute windfall for producers—what some might even call obscene profits—but it would also be a wrecking ball for the global economy, and a major challenge for oil-importing nations like India, potentially widening our trade deficit and fuelling imported inflation. It's a stark reminder that high prices are a double-edged sword for different economies.

For now, the trade is simple: own the producers, hedge against the consumer. The Shell stock price is a key play on that thesis in global markets. But this is a dangerous game of geopolitical chicken. Any hint of de-escalation and crude could tumble as fast as it rose, taking the sector with it. Conversely, a drawn-out conflict risks a demand-shattering recession. For the moment, however, in a market gripped by fear, Shell remains that rare thing: a blue-chip anchor in a sea of red for global investors, including those in India watching from the sidelines.