After huge growth over the last year, BP (LSE:BP.) shares suddenly lost momentum. If an investor had put £5,000 into the oil giant two days ago, when its share price was 600p, it would now be worth around £4,775.

Is this the end of the rally? Or maybe it’s just a momentary withdrawal?

Following the price of oil

It’s not difficult to see why BP shares have risen recently and now fallen. The price of oil has skyrocketed this year due to conflict in the Middle East and the closure of the Strait of Hormuz, an vital oil transport route.

Brent crude oil prices have exceeded $110 per barrel several times, after starting the year around $60. This price level obviously translates into much higher profits for oil producers such as BP.

However, since the United States and Iran agreed to a two-week ceasefire, crude oil has plummeted, with Brent crude at one point falling to $91 a barrel. As I write, it is $97.

This slowdown has negative consequences for BP. Therefore, the share price fell.

Oil supply problem

This stock price volatility highlights a stern problem with oil stocks: their unpredictability. Ultimately, they are somewhat speculative because their fate is tied to oil prices, which can be highly volatile.

When oil prices rise, it is usually good for stocks. However, if oil experiences a sudden decline, stocks will likely suffer.

What’s next for BP?

It’s difficult to predict where BP stock will go. Much will depend on the geopolitical situation, and specifically the situation in the Strait of Hormuz.

If significant de-escalation occurs, I would expect oil prices to decline, putting pressure on BP’s share price. However, I wouldn’t expect oil to go back to $60 a barrel in the blink of an eye – it could stay high for months or even years.

Alternatively, if the situation escalates, oil prices could rise, pushing stocks higher. It is worth noting that the rebound from $91 to $97 suggests that the ceasefire situation is unstable and the situation in the Strait of Hormuz is complicated.

So for investors, there is definitely an element of speculation here. There really needs to be a look at what happens to oil in both the tiny and long term (don’t forget the risks of decarbonization).

Is there any value left?

Looking at financial metrics, BP shares are currently trading at a forward-looking price-to-earnings (P/E) ratio of around 12.5, in line with the consensus earnings forecast for this year. However, this forecast may be off target given the recent volatility in oil prices, so I don’t think this indicator is very useful at this time.

Perhaps a more useful indicator of value for investors is dividend yield. It is approximately 4.5%, which is a decent result, but not high (and not as attractive as in recent years).

Based on profitability, the stock may still be worth considering. One way to look at these stocks might be to see them as a hedge against geopolitical instability.

However, taking a long-term view, I believe there are better opportunities in the market to consider. Personally, I focus on other high-quality stocks that have them fallen during the last sale.