Shares in BP PLC shot higher and then retreated in London Friday as the market veered between hope and caution over encouraging early signs of progress in stopping the Gulf of Mexico oil leak.

BP said it had stopped the leak Thursday night, but that was only the start of up to 48 hours of tests to determine whether the cap will hold.

BP shares were up 3.7 percent at 416.55 pence ($6.39) at midday in London after zooming as much as 8 percent higher in early trading, then retreating at one point to about 410 pence.

Still, the oil company's shares were up by more than a third since briefly falling below 300 pence late last month.

Jonathan Jackson, head of equities at Killik and Co. in London, said a bout of profit-taking was understandable given the share price rebound since late June and continued uncertainty about how much the company will be damaged by the Gulf disaster.

"Only once the flow of oil has been stemmed can the market begin to gain some visibility over the cost of the cleanup and potential liability for damages," Jackson said. "However, the latest announcement brings this point ever closer."

The company remained cautious about developments.

"Although it cannot be assured, it is expected that no oil will be released to the ocean during the test," BP said in a statement Thursday night.

"Even if no oil is released during the test, this will not be an indication that oil and gas flow from the well bore has been permanently stopped."

BP is drilling two relief wells which are expected to permanently stop the flow of oil.

As of Monday, BP said it had spent $3.5 billion dealing with the disaster which began on April 20 with a fire and explosion aboard the Deepwater Horizon drilling platform. That caused a break in a pipe nearly a mile deep.

BP says the total spending included nearly $165 million paid to settle individual claims.

The company says it is still too early to estimate the final total of costs and compensation. Meanwhile, it agreed to set up a $20 billion fund to cover potential costs, and it has suspended share dividend payouts for the rest of this year.

"Going forward,it is unclear what level of discount the shares will trade at relative to the peer group," said Jackson, the analyst.

"Consideration will have to be taken of factors such as the ability to access new assets — clearly the speculation BP may be barred from obtaining drilling permits in the U.S. in the future is unhelpful — or to attract specialist staff in a notoriously tight labor market."