International Consolidated Airlines Group (LSE:IAG) has been one of the FTSE 100‘s best performing shares of the last year. At 387.8p per share, it’s risen an impressive 55% in value. That’s roughly double the broader index’s rise in that time.
Despite these gains, IAG’s share price continues to offer some of the best value on the Footsie. At least, that’s the case on paper. Its forward price-to-earnings (P/E) ratio sits at 6.6, well below the index average of around 13.
Does this represent an attractive bargain opportunity?
Strong performance
IAG’s performance has remained rock-solid in a tricky period for the airline industry. Consumer spending remains under pressure in key markets, yet the British Airways owner continues to grow at an impressive rate.
Revenues increased 3.5% in 2025, helping drive underlying operating profit 13.5% higher, ahead of forecasts. It’s testament to the group’s excellent global networks and market-leading brands. An ongoing pivot to offering premium services is also paying off.
IAG has another major advantage: strong barriers to entry in the aviation hotspot of London. Capacity is constrained, and new airport slots extremely rare. By controlling around half of the slots at Heathrow alone, British Airways enjoys a dominant position on key routes, allowing it to command higher fares without the worry of losing business to competitors.
So what’s the catch?
The truth is, many stocks trade on rock-bottom P/E multiples for a reason. They can have poor growth outlooks, and/or face significant and rising risks. In the case of IAG, the dangers are growing rapidly as the Iran war rolls on.
The company has had to postpone flights on routes across the Middle East. But this isn’t its main problem. The conflict’s impact on the oil market is limiting supplies — around 20% of the world’s energy passes through the blocked Strait of Hormuz.
This creates two direct problems IAG. One is a sharp rise in fuel costs, the other a potential shortage of gas that could leave the group’s planes stranded on the ground. On Thursday (16 April), the International Energy Agency (IEA) warned that Europe has “maybe six weeks of jet fuel left“.
Even if the war ended tomorrow and the Strait reopened, it might still not be enough to avoid a shortage. After all, it takes weeks for oil tankers to reach their destinations from the Middle East.
Are IAG shares a buy?
The Iran conflict creates another significant, if indirect risk, for IAG shares. Rising oil prices are driving inflation higher, and weighing heavily on the economic outlook, as indicated by the IMF’s decision to slash global growth forecasts this week.
It’s a combination that could hammer demand for IAG’s services. After all, holidays away are among the first things consumers cut back on when times get tough. IAG could cut ticket prices to support sales, of course. But this would come at a high cost to its already threatened margins.
Long-term bargain hunters might want to give this cheap FTSE 100 share a close look. But I won’t be touching it with a bargepole.
