On Monday (2 March), IAG shares fell to their lowest point of the year. Are they now priced too attractively to overlook? Royston Wild examines the situation.
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No stock in the FTSE 100 has experienced a decline as steep as IAG (LSE:IAG) today — with a drop of 6%, its shares have plummeted to their lowest point since December.
Investors are responding to the escalating conflict in the Middle East and the resulting impact on airlines. With IAG’s share price now dipping below 400p per share, it may continue to decline if the conflict persists for an extended period.
Investment Opportunities Ahead
Could this be a chance for long-term investors to consider buying on the dip?
What has occurred?
In summary, on Saturday, the United States and Israel initiated military operations targeting locations in Iran and Lebanon, which led to retaliatory strikes throughout the region. Iranian drone and missile attacks have struck various hotspots, including Saudi Arabia, Qatar, and the United Arab Emirates, resulting in significant flight cancellations.
Expert Insights on IAG
British Airways has suspended flights to Tel Aviv and Bahrain through the middle of the week. Additionally, it is reported that services connecting London with Abu Dhabi, Amman, Bahrain, Doha, Dubai, and Tel Aviv may face disruptions for several days.
Flights have also been disrupted across IAG’s other carriers, Iberia and Vueling.
Numerous issues
Long-term Growth Potential
It’s not only the flight disruptions that have unsettled investors. The ongoing conflict in the Middle East is leading to additional issues, such as rising oil prices and, in turn, increased fuel expenses. On Monday, Brent crude reached its peak in over a year, just under $80 per barrel.
Experts believe that prices may exceed $100 per barrel if significant supply disruptions occur. Approximately 20% of the world’s oil supply passes through the Strait of Hormuz, where Iran attacked three tankers over the weekend.
As airlines adjust their routes to avoid Middle-Eastern airspace closures, the challenge of escalating fuel prices gains a new layer of complexity.
Will the sales continue to decline?
The Middle East represents just a minor segment of IAG’s worldwide presence. However, as illustrated, the potential consequences of this unfortunate regional conflict are significant. The concern is that it may become a prolonged situation lasting several weeks or even months, which could lead to a steady decline in airline stock values.
The FTSE 100 company faces an additional layer of risk. The comprehensive update from last year indicated that profits reached unprecedented heights, partly due to IAG’s effective shift towards providing more premium seating options. However, sales have sharply declined, with a 0.8% drop recorded in the fourth quarter of 2025. As economic instability and geopolitical tensions rise, this could pose an increasing threat to the company’s future.
Could IAG shares be a worthwhile investment?
On a positive note, the robust brand strength of IAG’s leading airlines may assist it in weathering a wider industry downturn. Additionally, it can anticipate further gains from its premiumisation strategy as new aircraft are introduced.
Are IAG shares a viable option to consider after today’s decline in price? They appear remarkably inexpensive on the surface — currently priced at 399p, they have a price-to-earnings (P/E) ratio of just 6.5 times.
Nonetheless, I strongly feel that this low valuation accurately represents the increasing risks confronting IAG and its current share price. While it may seem inexpensive, I would prefer to explore other investment opportunities like these.
