SHELL PLC (SHEL) SHARES: 2025 PERFORMANCE IN UK, KEY DRIVERS, MILESTONES AND RISKS —'26 OUTLOOK

Shell 2025 Share Price Performance

Shell plc (LSE: SHEL), one of the giants of the global energy sector, experienced a dynamic and somewhat volatile year in 2025. UK-based investors kept a close watch as the company's stock navigated through complex macroeconomic pressures, shifting oil and gas markets, and Shell’s own strategic pivot towards renewable energy. The FTSE 100 constituent ended 2025 having weathered both commendable gains and notable headwinds—with implications stretching into 2026.

In 2025, Shell's share price in London closed the year with a moderate positive return of approximately 9.4%, outperforming some of its European oil and gas peers but falling short of the tech-led momentum in broader global indices. The stock traded within a typical range of 2,300p to 2,600p, with volatility peaking during Q2 as a result of geopolitical instability in Eastern Europe and fluctuating Brent crude prices.

Contributing to price support were robust quarterly earnings anchored by relatively high average oil prices. For much of 2025, Brent crude held steady near the $85–$90 per barrel range, supporting enviable cash flows. Despite intermittent demand concerns in emerging markets, Shell’s upstream operations remained profitable. At the same time, downstream margins continued tightening amid weaker refining conditions in Europe, which led to reduced profit guidance during the third quarter.

Shell also benefited from continued investor confidence due to its aggressive share buyback programme. The company repurchased over $9 billion in shares over the course of the year, while maintaining dividends with minor increases, reinforcing its status as a blue-chip dividend payer. These efforts provided cushion for the stock during the equity market corrections seen in May and late September, when energy stocks broadly faced selling pressure.

In parallel, Shell reported continued reductions in net debt—cutting it down to $38 billion by Q4 2025, down from $40.5 billion a year prior. Balance sheet discipline was welcomed by investors, especially amid uncertain capital expenditure plans into the energy transition. Market perception shifted slightly more positive after Shell reaffirmed its cash capital expenditure guidance in the range of $22–$25 billion, pursuing a balanced investment profile between hydrocarbons and low-carbon technologies.

Still, Shell faced criticism from climate-focused investor groups and UK institutional shareholders who questioned the pace and clarity of its carbon reduction targets. A reduction in renewables investment forecast by 12% YoY for 2026 further intensified scrutiny of Shell’s energy transition policy, influencing longer-term investor sentiment.

Sector-wide consolidation also influenced price action. Rumours of potential M&A involving mid-tier North Sea operators briefly bolstered expectations for inorganic growth, although Shell remained focused largely on organic asset development, including sizeable investments in LNG infrastructure.

Overall, Shell’s 2025 performance demonstrated resilience but underscored the tightrope the company must walk between rewarding shareholders and adapting to an increasingly decarbonising world. Investors eyeing 2026 will find plenty of threads to pull—from global oil dynamics to hydrogen infrastructure commitments, carbon capture projects, and leadership alignment with green mandates.

Key Drivers and Strategic Outlook

Understanding the forces that shaped Shell’s 2025 performance calls for a comprehensive view of its operational pillars and strategic plays. Several central drivers emerged, spanning traditional oil and gas markets, capital return strategies, and evolving low-carbon ambitions.

1. Commodity Prices and Market Dynamics

Oil and gas prices continued to serve as the key determinant of earnings. Shell's integrated business model allowed it to capitalise on both upstream production and LNG trading, particularly in Asia-Pacific. Gas prices remained above historical averages, supported by colder-than-expected winters and outages in competing energy supply chains in the EU. This delivered meaningful trading profits for Shell’s energy trading division, which offset weaker refining margins.

2. Shareholder Returns and Capital Allocation

Shell maintained its capital discipline, bolstering investor confidence with continuous buybacks and a steady dividend. The company’s dividend yield hovered around 4.1%, highly attractive when seen against UK treasury yields and inflation-beating cash returns. Capital allocation remained conservative but flexible, with Shell demonstrating a preference for enhancing liquidity buffers while executing measured expansion into new energy sectors.

3. Transition Investments and Renewable Focus

Shell faced scrutiny for shifting away from earlier, more aggressive renewable investment plans. In 2025, it aimed to streamline and profitable its renewable pipeline, focusing selectively on wind, hydrogen, and EV charging networks in Western Europe. Meanwhile, divestments in solar energy projects in Asia hinted at changing risk appetite and a drive toward capital efficiency over sheer green expansion.

4. Political and Regulatory Environment

UK and EU regulatory headwinds grew in 2025, especially around emissions reporting and windfall taxes on energy firms. Shell incurred a £1.5 billion levy under the UK’s energy profit tax scheme, impacting net income. Environmental legislation also played a central role; Shell had to shore up reporting on climate compliance under sharpened EU directives, requiring increased sustainability disclosure spend.

5. Technological Advances and Operational Efficiency

Shell deepened its operational efficiency with AI-integrated maintenance and real-time analytics at its Gulf of Mexico and West of Shetland sites. These technological upgrades translated into a 6% YoY uptick in upstream output efficiency, reducing downtime and enhancing return on capital employed (ROCE). Although not as headline-catching, such improvements offer long-term margin lift and cost discipline.

6. Ongoing Restructuring and Organisational Realignment

Shell undertook internal restructuring, combining parts of its legacy gas assets and trading units. The goal was to increase vertical operational coordination. Investors welcomed the move given the tighter focus, though execution risk remains into 2026. Leadership changes also played a role, as the new CEO, Wael Sawan, focused on rationalising product lines to improve ROCE and cash delivery.

Strategically, Shell now positions itself not just as an oil and gas titan, but as an integrated energy provider with optionality across gas, power, and carbon pathways. Whether this diversified stance holds water will be tested deeper in 2026, particularly as investor patience on decarbonisation results runs thin amid increasingly bold ESG benchmarks.

What to Watch in 2026

As investors look ahead, Shell's 2026 trajectory will hinge on a number of macroeconomic, sector-specific, and firm-level developments. While 2025 established a stable foundation, several risk factors and growth levers may significantly influence future price action and long-term valuation.

1. Energy Prices and Demand Outlook

Key to Shell’s fortunes will be how energy markets evolve post-2025. The company's fortunes remain tied to Brent crude and LNG price trends. Should geopolitical instability persist or escalate in key producing countries, energy prices could become more volatile. Alternatively, if global demand softens due to economic slowdown—particularly in China and Germany—Shell faces margin compression risk.

2. Climate Policy Enforcement

Ever-tightening emissions regulations in the UK and across Europe will demand accelerated ESG alignment. In 2026, investors expect greater clarity on Shell’s Net Zero by 2050 roadmap. Institutional pressure, including that from activist shareholders, is likely to intensify, especially if renewable investments remain capped. Delay or dilution of green goals could trigger rerating concerns, particularly for ESG-led funds.

3. Dividend Growth and Buyback Continuity

Investors will closely monitor whether Shell maintains its pace of cash returns. Analysts forecast dividend hikes in the 3%–5% range for 2026, with buybacks contingent on commodity prices. A dip in oil prices or windfall levies extended in the UK could crimp free cash flow, forcing adjustment. A stumble here may test confidence from income-focused investors.

4. LNG Market Expansion

Shell's strategic commitment to LNG could pay dividends in 2026. Key liquefaction projects in Nigeria and Australia are poised to ramp up, providing capacity growth. Asian LNG demand, particularly in India and South Korea, remains a favourable secular trend. Any delay due to permitting or supply chain snags would be material risks to watch.

5. Carbon Capture and Hydrogen Focus

Shell’s £5 billion pledge toward carbon capture and low-carbon fuels is a vital test of its transformation ethos. As pilot projects in Norway and Canada begin commercial rollout, investors will expect signs of scaleability and regulatory support. Loss of government backing or underperformance in this arena could undermine Shell’s climate credentials.

6. Political and Legal Exposures

Increased litigation over historical emissions, or fresh penalties tied to the 'polluter pays' principle, could impact Shell in 2026. Additionally, a change in UK government policy post-election could reshape the tax and operating environment for oil and gas incumbents. Investors would do well to monitor manifestos from major political parties and policy shifts tied to energy sovereignty.

Ultimately, Shell walks into 2026 as a strong, diversified player with scale advantages, but one facing increasingly complex expectations. Continuity in capital discipline, clarity in green goals, and agility across energy platforms will form the pillars of shareholder confidence in the year ahead.