Shell more than doubled its profit in its second quarter of the year, as Europe’s biggest oil and gas company reaped the benefits from the jump in oil and gas prices triggered by war in the Middle East.

The FTSE 100 company’s net profit hit $9.84bn (£7.4bn) in the three months ended in June, more than double compared with the same period last year.

The surge in profit comes as wholesale energy prices have soared because of the conflict in the Middle East, boosting profit margins and activity on Shell’s trading desks.

The global oil price has climbed from about $61 a barrel in January to highs of $126 at the end of April, owing to disruptions to flows of oil and gas through the strait of Hormuz. Brent crude, the international benchmark, traded at $93.18 a barrel on Thursday.

Wael Sawan, Shell’s chief executive, said there had been “severe disruption in global energy markets” due to the war, as the company also reported a 30% drop in production from its integrated gas division on the same quarter last year.

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Rolls-Royce is not the only weapons company to report strong demand today: BAE Systems has also said that “sustained increases” in defence budgets around the world meant it had upgraded its profit forecasts.

BAE Systems’s sales rose 9% year-on-year during the first half of the year to £15.8bn, while it recorded orders worth £16.4bn, up £3.2bn from the same period last year.

The company raised its profit outlook to an increase for the full year in the range of 10% to 12%, slightly higher than the range of 9% to 11% it had previously given.

The manufacturer makes a large proportion of the UK’s weapons, ranging from tanks and fighter jets to munitions. But it has also benefited from demand in the US, which had raised weapons spending even before its war on Iran, and other export allies of the UK such as several countries in the Gulf.

The two upgrades helped the FTSE 100 to rise on Thursday morning after initially dropping. Rolls-Royce shares gained 3.7%, while BAE Systems was up 1.1%.

Charles Woodburn, BAE’s chief executive, said:

Across the business, our outstanding teams have delivered another strong period of operational and financial performance, which gives us the confidence to upgrade our full year guidance.

The global threat picture remains highly volatile and governments are responding with sustained increases in their defence budgets. The combination of our proven execution, diverse geographic footprint and continued investment in our technology and facilities, alongside our healthy order backlog and growing opportunities across our markets, positions us to keep delivering long-term growth.

BAE said it had invested in factories in Texas and New Hampshire to support the US Government’s ambition to quadruple production of critical munitions. The company also unveiled a new autonomous fighter drone, called Brontanax, at the Farnborough air show last week. Woodburn said the “loyal wingman”, which would fly alongside a manned fighter jet, had “generated a lot of interest”.

Rolls-Royce reported £2.5bn in underlying profits for the first half of 2026 and raised its forecasts for profits for the full year as it said its turnaround efforts had brought higher earnings in all its divisions.

Underlying profit before tax for the first half of 2026 rose to £2.5bn, up 48% from the same period a year earlier. Statutory profits halved to £1.9bn, although those figures tend to be volatile because of the timing of payments. Revenues were up by £2bn year-on-year to £11.3bn.

The FTSE 100 jet engine manufacturer has gone through an extraordinary period of growth under chief executive Tufan Erginbilgic, who was brought in 2023 to turn the company around. Those efforts appear to have paid off so far, with investors welcoming soaring profits.

The manufacturer on Thursday said it expects £4.7bn to £4.9bn in underlying operating profit, up from previous guidance of £4.0bn to £4.2bn. The free cashflow forecast is also up from between £3.6bn and £3.8bn to between £3.8bn and £4.0bn.

The company has benefit from the recovery since the coronavirus pandemic lockdowns in long haul flights, many of which use Rolls-Royce engines. At the same time, defence spending has risen since Russia’s full-scale invasion of Ukraine in 2022, and its power generation unit has benefited from increased demand from datacentres used by AI companies.

In its civil aerospace business the company has also spent heavily on fixes to passenger jet engines to keep them in the air for longer, reducing the number of aircraft on ground (AoG) at any time. It is also pressing ahead with producing small modular reactors to generate nuclear power in the UK, Czechia and Sweden.

Erginbilgic said:

Our transformation continues to deliver, and we are demonstrating that Rolls-Royce is now a very different company to that of the past.

We have made significant operational and strategic progress in the first half of the year. In civil aerospace, where we continued to improve our aftermarket profitability, we have also effectively eliminated aircraft on ground, providing a significant operational benefit to our customers. In defence, we continued to establish our leading position in autonomous propulsion with several key milestones achieved in the period.

In power systems, we captured further profitable growth in datacentres, including growing prime power demand. Following its recent win in Sweden, Rolls‑Royce SMR has now been successful in every competitive European nuclear tender and is uniquely positioned to become a global market leader.

Good morning, and welcome to our live coverage of business, economics and financial markets.

London’s FTSE 100 is set to fall when it opens after the US Federal Reserve held interest rates steady despite the increasing expectations of inflation, while Donald Trump’s renewed attacks on Iran promised to add fuel to the price rise fire.

Futures prices suggest the FTSE 100 will drop by about 0.6% when it opens. The UK’s blue chip index rose to a new record as high as 10,951 points on Wednesday morning, but fell back later in the day to 10,864.

Analysts at Deutsche Bank led by Peter Sidorov said the market moves were triggered by last night’s “on-hold Fed decision combined with a relative lack of detail from Chair Warsh”.

Kevin Warsh was appointed by Trump after courting the US president with an agenda to lower interest rates. That has put Warsh in a very tricky position as investors expect inflation to rise because of the US-Israeli attacks on Iran, which have caused oil prices to soar.

Bond yields rose after the Fed meeting, suggesting investors doubt whether the Fed can control inflation. Sidorov and co wrote:

This rise in yields ended up weighing on equities after some big intra-day swings. The S&P 500 went from trading more than half a percent down pre-FOMC to higher on the day during Warsh’s press conference but then saw a sharp drop in the final hour of trading to close -1.52% lower. Equities were also weighed down by another rout in chip stocks, with the Philly semiconductor index slumping by -5.33%.

The declines on the FTSE 100 are likely to be moderated by some strong results on a busy day for UK corporate news: among the reporting companies were BAE Systems, Lloyds Banking Group, London Stock Exchange Group, and Shell.

Jet engine manufacturer Rolls-Royce was also among the companies reporting. It raised its profit guidance yet again, continuing an extraordinary run in recent years. It expects between £4.7bn and £4.9bn in underlying operating profit and £3.8bn to £4.0bn in free cash flow for the full year.

More details to come.

The agenda

• 9am BST: Germany GDP growth (second quarter; previous: 0.3% quarter-on-quarter; consensus: 0.1%)

• 10am BST: Eurozone GDP growth (second quarter; prev.: -0.2% quarter-on-quarter; cons.: 0.2%)

• 10am BST: Eurozone unemployment (June; prev.: 6.2%; cons.: 6.2%)

• 12pm BST: Bank of England interest rate decision (prev.: 3.75%; cons.: 3.75%)

• 1pm BST: Germany inflation (July; prev.: 2.3%; cons.: 2.7%)

• 1:30pm BST: US core personal consumption expenditure index (June; prev.: 0.3%; cons.: 0.2%)

• 1:30pm BST: US GDP growth (second quarter; prev.: 2.1%; cons.: 2.1%)