Despite a big plunge in spring 2025, the BP (LSE: BP) share price ended last year up just over 10% (excluding cash dividends). Not a bad annual return, but nothing to write home about. However, since the start of this year, the shares have bounced around like crazy. What’s causing this increased volatility and uncertainty for BP shareholders?

BP: beginnings in Persia

BP began life in 1909 as the Anglo-Persian Oil Company, later becoming the Anglo-Iranian Oil Company in 1935 and then the British Petroleum Company in 1954. After merging with US rival Amoco in 1998, it briefly became BP Amoco before rebranding to BP in 2000.

For decades, BP was owned by the British state and its people. In 1977, the UK started selling off its stake to private investors, including a disastrous sale to the public coinciding with the Black Monday stock-market crash of 19 October 1987. Since then, BP has been a stalwart of the UK’s elite FTSE 100 index.

What’s fascinating to me is that the share price of this global energy giant has basically gone nowhere since April 1999. On Friday (8 May) the stock closed at 535.6p, around 6% below its closing price 27 years ago. Then again, the shares have leapt 43.9% over the past year and 70.8% over five years, again excluding dividends.

BP: bouncing price

That said, BP shares have been way more volatile than usual so far this calendar year. The good news for shareholders is that the share price has jumped 23.8% in 2026, with much of this bounce coming after the US attacked Iran on 28 February.

However, the shares have jumped around from a 2026 intraday low of 413.3p to a peak of 609.4p on 31 March. That’s an unusually wide range in a little over four months. What’s the cause? Three factors — the oil price, the US/Israel-Iran war, and the pronouncements of President Donald Trump — are driving the price up and down.

With the latest Middle East war settling into an uneasy stalemate, the BP price has dropped 12.1% from its March high. Meanwhile, the oil price has dipped by only 3.4% over this timeframe. To me, this suggest that BP’s valuation may have got a bit ahead of itself in March’s buying frenzy.

BP: bigger price?

Speaking of valuation, BP’s current market value stands at £84.6bn, making it a FTSE 100 heavyweight. Rising quarterly dividend payouts have boosted this stock’s dividend yield to 4.6% a year. That’s well ahead of the wider Footsie‘s yearly cash yield of roughly 3%.

In my view, the shares look like a simple binary bet on the Iran war and the oil price. If the conflict drags on, then problems in the Strait of Hormuz could crimp global oil supply and pump up oil prices. Conversely, if the war ends swiftly or convincingly, then falling energy prices could drag down BP’s valuation.

My family portfolio holds BP shares, having paid 484.1p a share for our stake in August 2023. Given the healthy income they pay, plus their use as a hedge against rising energy bills, I will hold on tightly to this shareholding for now. Likewise, value investors could consider buying BP stock for its healthy dividends and exposure to oil and gas prices.