You can imagine my chagrin when a certain orange-coloured individual decided more war was needed in the Middle East. The awful humanitarian consequences of the Iran war are the worst part, of course. But it’s having ripple effects on businesses and economies and not all of the negative effects have been felt yet. Among the early losers have been airline stocks, just like the one I bought recently!

Cheap buying opportunity?

Following the start of the conflict on 28 February, the easyJet share price fell 27% in just over a month. The FTSE 100 only fell 9% over the same timeframe, which shows just how much more affected the airline was.

So what’s going on here? Incredible buying opportunity for an already cheap-looking stock? Perhaps…

For one, things might be turning around. The share price is actually up over 10% since the start of April. A £10,000 stake would have turned into £11,083 in double-quick time. More good news regarding the conclusion of this conflict and that could just be the start of things.

And the falling share price has pushed the valuation down to levels almost unheard of. The current price-to-earnings ratio of 5.88 is almost as cheap as it gets on the FTSE 100. It’s very rare for a figure to stay that low for long.

My decision

Are there risks? Absolutely. Even if the Iran conflict gets wrapped up soon (hopefully) there will be lingering consequences. The price of oil is not likely to fall back down to previous levels. Jet fuel is one of the biggest considerations for the margins of airlines.

The conflict is having an effect on consumer behaviour too. In the early stages of the war, folks were booking flights closer to home rather than far-flung destinations – remember the Middle East is a travel hub for those wishing to visit Asia and Australasia. The latest news suggests people are opting for holidays in the UK rather than going abroad too. Lower demand for flights is bad for any airline, but especially low-cost ones like easyJet that operate on wafer-thin margins and high volume.

My decision? I have no intention to sell, and believe this could be a stock worth considering for the right investor. I will say that it’s one of the riskier elements of my portfolio due to the ongoing nature of global events. Some may wish to steer clear for those reasons.

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There is an obvious reason for that: the Middle East war threatens to see passenger demand fall, while jet fuel prices have surged. It expects to report a headline pre-tax loss of between £0.5bn and £0.6bn for the first half of its current financial year.

Still, easyJet has triumphed through adversity before.

The pandemic hammered the shares, but they went on to more than double between October 2020 and April of the following year.

In just six months, that meant a great return for investors who had been brave enough to buy when the market had pushed the share price down.

Can easyJet ride the latest storm?

Just because something has happened before does not necessarily mean it will happen again.

History is littered with airlines that have successfully navigated multiple crises – until they met one that they could not survive.

Having said that, I am fairly upbeat about the medium- to long-term outlook for easyJet.

It has a well-honed, proven business model. Even if passenger demand does fall temporarily, when it bounces back I reckon the carrier is well-positioned to benefit from it.

Anyway, in its most recent quarter, the company said that “strong late demand for domestics, cities and the Western Mediterranean offset war-related softness in Egypt, Turkey and Cyprus”.

This looks pretty tempting to me

Plus, easyJet has entered the latest challenging period for aviation in good financial shape. It has net cash of £0.5bn with a lot of additional liquidity (like agreed borrowing capacity) it can call on should it need to.

The company has also hedged 70% of its summer fuel needs, meaning that even if prices go up it will not pay more for that percentage of its fuel needs. Still, costs could potentially soar on the unhedged 30% depending on what ongoing Middle Eastern uncertainty means for the oil market.

From a long-term perspective, I feel confident the carrier can ride the current storm. In fact I think its current price undervalues the long-term potential and could end up looking like a deep bargain a year or two from now.

I’m watching, but not in a hurry

Still, I am hesitant.

Airlines can often look like terrific bargains when the chips are down – but they may still turn out to be horrible investments.

There are some simple reasons for that: passenger demand and fuel costs are often outside airlines’ control, even though they can hedge their fuel costs in the short term. The industry is competitive and complex. Running costs are high, even when planes are not well-utilised.

I am going to wait a bit and try to get a firmer idea of whether the current short-term challenges for easyJet and its peers look set to end soon, or develop into more enduring problems.

Cheap though easyJet shares look, I am not ready to buy any just yet.

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Worse than expected

You don’t need to be Warren Buffet to understand why the Luton-based business is finding things so tough. The US-Iran conflict has pushed fuel prices skyward. Given that easyJet will have been gearing itself for the busiest time of its financial year, the timing couldn’t have been worse.

Based on the reaction, yesterday’s trading update was even more dire than the market had been expecting. CEO Kenton Jarvis and his team anticipate reporting a pre-tax loss of £540m-£560m for the first half of the financial year.

No wonder shares have now fallen almost 28% in 2026 alone.

This dramatic fall might be slightly easier for existing investors to take if other aviation stocks were suffering to a similar extent. But this isn’t the case. British Airways owner IAG, for example, is down ‘only’ 8% from where it stood at the beginning of 2026.

In sharp contrast, a stake of £10,000 invested in easyJet as markets opened up in January would now be worth roughly £7,200. There was 13.2p per share dividend paid at the end of March but that’s hardly likely to soothe the pain.

Reasons to consider easyJet shares today

As tough as the last few months have been, there’s an argument that new investors would be getting a great deal today.

A price-to-earnings (P/E) ratio of seven is certainly low (albeit IAG is still slightly cheaper). It suggests a lot of bad news is already priced in. With net cash of £434 million at the end of March, the balance sheet doesn’t look stressed either.

The company’s clearly popular with flyers too. The load factor in the first half rose to 90% and customer numbers for easyJet holidays climbed 22%. It also saw it’s “busiest Easter holiday period ever”.

Based on all this, I think the income stream looks safe. But the question is whether these things are enough to convince investors that this isn’t a value trap disguised as a beautiful bargain.

Feeling lucky?

I’m not sure it is. The way ‘negotiations’ are proceeding between the US and Iran, easyJet shares might continue to lose height in the weeks ahead. Indeed, the fact that the company’s currently receiving considerable interest from short sellers isn’t the best sign.

One thing I’m keeping in mind however, is that this isn’t anything to do with the company per se. So if there is a resolution of sorts, I think it’s perfectly possible that easyJet could recover. We know its shown itself able to navigate its way through tough times before, including the monumental shock to the system that was Covid-19.

But this feels like a binary bet, at least for now. And that doesn’t strike me as the sort of ‘investing’ I want to get involved in. As a Fool, I’m looking to grow my wealth steadily over the long term rather than take on extra risk.

I reckon there are far better opportunities for me to make money elsewhere.

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Actually, make that 14 years. At today’s price of roughly 375p, the budget carrier’s shares are back to 2014 levels. That may well tempt bargain seekers but obviously, there’s a risk. The stock might just keep falling. Frankly, it has become a bit of a habit.

Regular FTSE 250 faller

Yet investors are starting to wake up. Figures from investment platform AJ Bell show easyJet was the eighth most bought UK stock last month. Sadly, anybody who did snap it up in March may wish they’d waited.

This morning’s trading update for the six months to 31 March showed an expected loss before tax of between £540m and £560m in the first half of 2026. That’s potentially up more than 40% from a £394m loss in the first half of 2025.

The good news is that EasyJet typically makes the bulk of its profits in the second half. Full-year 2025 profits ultimately landed at £665m, up 9% on 2024. Unfortunately, the second half of the 2026 financial year looks much less certain, due to the war in Iran.

That’s already starting to bite, with easyJet facing £25m in extra fuel costs in March alone. It’s also facing ongoing “near-term uncertainty around fuel costs and customer demand”, the board said today. Nobody knows how bad the oil price spike and shortages will be. There’s even talk of summer flight cancellations, but we just don’t know yet. It would be a huge blow should the conflict hit the peak summer flying season, where easyJet makes its real money.

Last month, CEO Kenton Jarvis warned prices might have to go up by the end of the summer to cover extra fuel costs. Given the broader squeeze on consumers, that could further hit demand. 

Solid balance sheet

There were some positives today. First-half demand remained solid, with the load factor up two percentage points year on year to 90%. Its successful easyJet holidays venture continues to enjoy strong demand, with customer numbers up 22%.

The board also highlighted the group’s “investment grade balance sheet”, with net cash of £434m and liquidity of £4.7bn. It’s also 70% hedged for jet fuel prices over the summer. It just worries me slightly that the board felt the need to point that out.

easyJet already faced big challenges, and they’ve just intensified. I’ve been watching it for several years but haven’t taken a punt on it yet. Today, it looks more tempting than ever, with a super-low price-to-earnings ratio of 5.89 and trailing yield of 3.5%. At some point, the shares will surely fly, but investors would have to be very brave to consider easyJet today.

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The European low-cost airline and package holiday group has had a rough start to the year, with its shares taking a significant beating following the outbreak of war in the Middle East. So much so that almost a third of its market-cap was wiped out during the first quarter.

Since then, hopes for an eventual peace deal have helped easyJet shares partially bounce back. But what exactly is dragging down the share price? And has it secretly created a buying opportunity for contrarian portfolios?

Inspecting easyJet’s tumble

The sudden and sharp decline of easyJet shares isn’t too difficult to understand. Investor sentiment surrounding the airline industry has tanked in large part due to the sudden rise of oil & gas prices – the prerequisite commodities for making jet fuel.

In other words, the cost of running an airline has increased dramatically, and easyJet’s no exception.

While the business does have some insulation in place thanks to previously hedging some of its expected fuel expenses in 2026, the company’s far from immune. And it’s why, despite having limited route exposure to the Middle East, easyJet shares were nonetheless caught in the investor panic-selling crossfire.

However, this is where things get interesting. While the headwinds of higher fuel costs are undeniably problematic, weak sentiment has dragged the firm’s forward price-to-earnings ratio down to just 5.1 – an extraordinarily cheap valuation.

So could a buying opportunity have been created here?

To buy or not to buy?

The low forward earnings multiple is a fundamentally compelling entry point if peace returns to the Middle East and the price of jet fuel starts to fall back to more sustainable levels. However, if the conflict continues, analyst profit targets for 2026 could be missed, making easyJet’s cheap-looking valuation a trap.

The timing of this uncertainty is also less than ideal. The company makes the bulk of its profits during the peak summer period. So even if the war comes to a close later in the year, trudging through high operating costs during this critical trading period also risks today’s valuation being a trap.

Having said that, the group’s fleet renewal to more fuel-efficient aircraft in 2027 could help lower the financial pressure of jet fuel prices if they remain elevated through wider profit margins.

So where does this leave investors? The honest answer is that the near-term fate of easyJet shares will most likely be determined by the direction of oil prices, making it arguably one of the most binary investment cases in the FTSE 250 today.

Personally, I’m not a fan of coin-flip risk profiles, and that’s why I think investors may be better off looking elsewhere for investment opportunities.

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There are a couple of names that look incredibly cheap initially, but I’m staying well away from them. Why? A closer look reveals some hidden liabilities.

Vodafone: not as cheap as it looks

At first sight, Vodafone (LSE:VOD) shares look cheap. On a screener, it shows up as trading at a free cash flow multiple somewhere around 4.

In reality, it’s not that cheap. And this is why investors need to do more than just look at screeners. 

Officially, free cash flow is cash from operations minus capital expenditures. In Vodafone’s case, that’s €14bn less €6.9bn.

Set against a €27.2bn market cap, that is indeed a multiple of 3.8. But this isn’t the entire story with this company. 

Vodafone’s cash outflows are much more than just its capital expenditures. They include things like interest expenses and lease liabilities.

Source: Vodafone 2025 Annual Report

None of this is a secret. The company presents all of this in its investor materials, but those investors do need to go and find this to figure it out.

Adding all of this in, the firm’s free cash flow is actually closer to €1.8bn. And that implies a multiple closer to 15. 

I’m not saying there’s anything wrong with the business. But investors attracted by a low multiple should take a closer look.

easyJet: hidden liabilities

easyJet (LSE:EZJ) is another stock that isn’t as cheap as it looks. On the face of it, the stock looks like a financial fortress. 

Again, at first sight, the firm shows up as having more cash than debt. And this is accurate, but it’s not the whole story.

The company has around £2bn in what it calls “unearned revenue”. That’s cash it’s received from customers for services it hasn’t provided yet.

Source: easyJet 2025 Annual Report

This is pretty normal in this industry. Customers usually book their flights and holidays months in advance of going on them.

It’s also a good thing. It means easyJet doesn’t have to use debt to finance its operations – it can use unearned revenues and not pay interest. 

These liabilities don’t show up as debt, because easyJet isn’t going to pay customers back. But it is going to have to meet those costs. 

Again, there’s nothing wrong with how easyJet reports this. Investors just need to know what they’re looking for. 

In the context of a £2.8bn company, £2bn in additional liabilities is a lot. And when I factor this in, I become less interested in the stock.

Hidden risks

UK stocks have a reputation for being cheap. And a lot of them look that way at first sight on a basic screener. 

On closer inspection, though, some are less attractive than they seem. So taking a proper look is non-negotiable for investors.

I don’t really use screeners in my own investing. But I’m not against it in principle. 

I do think that there’s no substitute for a proper look at a company’s reports. That’s where investors can find hidden risks.

Both Vodafone and easyJet have strengths. But after looking more closely, neither makes it onto my list of stocks to buy.

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Is it too late to get on board this airline stock? Let’s take a look.

Can the share price return to 500p?

Before the Iran war kicked off, easyJet shares were trading near 500p. We can’t just assume that the share price will return to this level if the geopolitical conflict ends though.

One major issue is oil prices. These have shot up due to the closure of the Strait of Hormuz and they could stay elevated for a while even if the conflict ends and this vital oil corridor reopens. This increase could put pressure on easyJet’s earnings, because fuel is typically one of the largest costs for airlines.

Note that last month, easyJet said that it has hedged the majority of its fuel needs for the coming months, but by the end of the summer those hedges start to come off. So if oil prices remain elevated beyond the end of summer, the company could be looking at dramatically higher costs (the price of jet fuel today is around $1,700 per metric ton versus easyJet’s hedged price of around $700) and therefore lower profits.

What about demand?

We also need to consider secondary effects of high oil prices. One that can’t be ignored is consumer spending weakness. If oil prices remain elevated, consumers are likely to have less disposable income because more of their cash will be going towards petrol, heating, and food (there’s talk of UK food prices rising 10% this year due to the Iran conflict).

This could be a major issue for easyJet because it’s a budget airline and many of its customers are lower down on the earnings spectrum (this demographic tends to be hit harder by inflation than wealthier consumers). It could be impacted more than premium airlines such as British Airways and Virgin Atlantic, which tend to serve more affluent consumers.

It’s worth pointing out that easyJet has said ticket prices will rise towards the end of the summer due to the Iran war. This could further reduce demand.

Worth the risk?

So there are some big risks to the investment case here. I think it’s unlikely that the shares will suddenly fly back to 500p. That said, I do see potential for further share price gains if the geopolitical backdrop improves significantly. If we see a major de-escalation, and a full opening of the Strait of Hormuz, I’d expect the stock to move higher.

Bottom line: people still want to travel. This is illustrated by the fact that easyJet bookings in January were the strongest ever and demand for easyJet holidays (a key growth driver for the group) was high. So the shares could definitely be worth considering as a recovery play. Investors need to be prepared for turbulence though.

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A decade of share price pain

easyJet has struggled for years. Back in April 2016, the shares traded at 1,250p. This morning, before the market opened, they sat at 356p. Incredibly, they’re down more than 70% over the decade.

The pandemic grounded the industry and left airlines scrambling to survive. The Russian invasion of Ukraine drove up fuel costs and the subsequent cost-of-living crisis hit Europe hard, threatening demand. Throw in operational disruption, strikes, squeezed margins, and intense competition and the shares remained firmly grounded.

Yet it’s hardly a basket case. Full-year 2025 headline pre-tax profits to 30 September rose 9% to £665m, driven by high demand and the profitable growth of its holiday division. Net cash jumped from £421m to £602m, a near 43% increase. Rival FTSE 100 carrier International Consolidated Airlines Group (IAG), which owns British Airways, has been in demand despite facing many of the same pressures. easyJet looks a little picked on.

On 29 January, the board maintained full-year guidance after a strong first-quarter and said summer bookings were building well. On 11 February, Citi upgraded the stock to buy, with a 600p target price. It pointed to stabilising costs and the prospect of improving margins from 2026, helped by fleet upgrades.

Then came the Iran conflict, with the threat of higher oil prices, jet fuel shortages, and flight cancellations. IAG has taking a beating too. But last week something changed and easyJet buyers came out in force.

Valuation and risks

There’s one obvious attraction. After such a dismal run, the shares look cheap, trading on a price-to-earnings (P/E) ratio of 5.4. Then again, they’ve looked cheap for some time, so value alone doesn’t explain the sudden surge in interest. The dividend yield has climbed to 3.7%, which is decent but not enough to drive buying on its own.

It’s also worth noting that the FTSE 100 as a whole recovered strongly in the run-up to Easter, despite global tensions. Some investors may feel the sell-off went too far and are looking for recovery plays. Given that low valuation, easyJet is a big one, potentially. Seventeen analyst forecasts produce a median one-year share target of 512p. If achieved, that would represent a mighty 43% gain from current levels. Of course, forecasts are never guaranteed, and many will have been written before the latest volatility.

Investors look prescient today. The easyJet share price has jumped 13% in early trading, as markets bounce back on news of the two-week ceasefire in Iran. I think braver investors might consider buying the budget airline as an exciting long-term recovery story. They shouldn’t expect a smooth ride, though.

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Over the last month, easyJet’s share price has tumbled 19.2%. As a result, someone who put £5,000 in the budget airline on 2 March would have seen the value of their investment fall by £960, to £4,040.

Despite its recent price uptick, I have a nagging feeling the FTSE company might dive again.

Three huge threats

As I say, easyJet shares have picked up in recent hours. The reason? President Donald Trump stated that the US will withdraw from the Middle East conflict in “two or three weeks“.

Stocks across the global market have risen on the news. But airline stocks are especially vulnerable to a prolonged conflict, meaning their price gains have been especially strong. For easyJet, the war has had a three-pronged impact:

• Driving up fuel costs due to oil supply disruptions
• Causing flight disruptions to places like Tel Aviv
• Damaging consumer spending by raising inflationary expectations and slowing economic growth

It’s easy (no pun intended) to see why shares have leapt on Trump’s comments. But have investors been premature in diving back in? Signals from the White House on a planned withdrawal have been mixed from day one. Furthermore, statement from Iran are also painting a different picture to what the US president says — leaders there have dismissed the Trump’s claims that Iran has asked for a ceasefire as “false” and “baseless“.

A high-risk FTSE 250 stock?

I’m as much in the dark as to what’ll happen on the war front as anyone else. But that’s my point. Share prices have marched up and down on claims and counter claims since the war began. It’s possible this could be another such episode.

It may be worth taking a step away, then, and considering other factors that could impact easyJet’s share price. Unfortunately, this causes me more worry, not less.

The thing is, easyJet was already under pressure before the conflict kicked off. Revenue per available seat kilometre (RASK) is a key performance metric, showing how much revenue the airline generates relative to capacity. And this failed to grow year on year in the December quarter, reflecting rising competitive pressures and softening ticket prices.

That wasn’t all, as a combination of rising investment and a competitive landscape meant underlying pre-tax losses widened in the quarter, to £93m from £61m.

Are easyJet shares a buy?

There’s a lot the Luton flyer has in its favour over the long term. Passenger demand is tipped to rise strongly, and the firm’s wide operational footprint and economies of scale puts it in good shape to seize the opportunity.

But on balance, I’m not tempted to buy easyJet shares for my own portfolio. Thin profit margins, intense competition, volatile oil prices, and flight disruptions are just a few ever-present threats that investors have to swallow. Though more adventurous share pickers may fancy a look, I’m moving on and searching for other stocks to buy.

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Engines ready

The first one is easyJet (LSE:EZJ). The well-known budget airline has seen its share price fall 25% over the past year and 29% in the past three months. At first glance, the dip looks alarming. But when I dig a little deeper, it starts to resemble the kind of temporary turbulence long-term investors often learn to ignore.

The primary culprit has been a sharp shift in the macro environment rather than any collapse in the business. The escalation of tensions in the Middle East has pushed jet fuel prices sharply higher. This immediately squeezes easyJet’s profit margins.

At the same time, investors have grown nervous about inflation and interest rates staying higher for longer, raising concerns about discretionary spending, such as holidays. Add in a weaker pound (which inflates dollar-denominated fuel costs), and you have a perfect storm for the company.

Despite the share price weakness, demand remains robust. Q1 results from the end of January showed that summer bookings are strong. In fact, the CEO noted the “largest-ever January booking period.”

The holidays division continues to grow rapidly. This points to a business that’s still benefiting from structural demand for low-cost travel across Europe.

From a valuation perspective, the disconnect is even clearer. The shares are currently trading on a price-to-earnings ratio of 5.4, which is exceptionally low for a company with solid growth prospects. If the situation in the Middle East eases over the coming month or so, I think the stock could rally to a much fairer valuation.

A transformation titan

Another option is GB Group (LSE:GBG). The tech firm provides digital identity verification and fraud prevention services, helping businesses confirm who their customers are and detect suspicious activity.

The stock’s lost 37% over the past year, with 25% of that loss occurring in the past three months. The situation in the Middle East has been a factor, with the company also having flagged that tariff-related and geopolitical uncertainty would weigh on growth, particularly in the US.

The business is also in the process of migrating to a simpler operating model and a single global platform. In the half-year results from late last year, early signs of progress came through. Revenue rose 1.8% versus the same period last year, with adjusted operating profit up 1.9%. Granted, nothing to shout about, but certainly the steadying of the ship.

I think the worst is now behind the company, and the ongoing changes should materially boost profits in the coming year. The short-term move to me feels like a classic case of weak sentiment overwhelming a business that’s actually making steady operational progress.

Of course, if geopolitics provides more headaches this year, then it remains a risk for GB Group. But, on balance, I think both easyJet and GB Group have been oversold and could be worth considering.

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