After a 35% gain in 3.5 months, is it time to consider selling some Shell shares?

Shell (LSE: SHEL) shares have experienced a powerful move higher. In the space of around three-and-a-half months, they’ve surged about 35%.

Is it time to consider banking some profits after this monster share price rally? Let’s discuss.

The shares looked attractive in July

The last time I covered Shell was early July. At the time, the stock had fallen to around 2,900p on the back of lower oil prices, and I said that the shares were worth considering at that level.

I was actually very tempted to buy as a geopolitical hedge and for dividend income, despite the fact that I usually avoid commodity shares (because they’re so unpredictable). Annoyingly, I didn’t buy them and they’ve jumped 35% in the blink of an eye as oil prices have surged again.

The risks today

Today, they don’t look that expensive. With analysts having raised their 2026 earnings forecasts in recent months as oil prices have moved higher, the forward-looking price-to-earnings (P/E) ratio is only nine.

Here’s the thing though – if oil prices were to come down as a result of less tension in the Middle East, I would expect the shares to take a hit. If Brent crude oil was to pull back from $107 per barrel to $85, for example, I think we could easily see a pullback of 10%-20% in the FTSE 100 company’s share price.

So investors in the company really need to make a prediction for oil prices (which is never easy). If they believe that oil prices will remain high, the shares could be worth hanging on to.

However, if they believe that oil prices will come down from here, it could perhaps be a good time to consider selling some shares. After all, right now, they’re sitting at all-time highs.

My prediction for oil

Personally, I reckon that oil prices will come down at some stage in the not-too-distant future. They may not fall in the next few months as the consensus among security experts is that tension in the Middle East will remain acute and volatile in the short term.

However, I think there’s a decent chance they will fall in 2027 as structured diplomatic initiatives create a path towards stabilisation. It’s worth noting here that analysts estimate that market anxiety is contributing roughly a 15%-20% per barrel ‘risk premium’ over structural oil market fundamentals.

There are other opportunities in the market worth exploring

Of course, Shell shares could still play a role in a portfolio even if oil prices came down. For me, a major attraction is that they can offer a hedge against a spike in geopolitical tension.

There are also dividends on offer. However, the yield – for anyone buying at today’s share price – has fallen to around 3%, well below the average yield here in recent years.

But a pullback in oil prices is certainly a risk. So considering taking some profits could be a sensible move, especially with so many great opportunities elsewhere in the FTSE 350 today. Trimming a position in Shell could also free up cash to take advantage of some of these…

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Edward Sheldon does not hold any positions in the companies mentioned.