At 396.1p per share, IAG’s share price has gained ground after plunging at the start of the war in Iran. But it remains 6.3% lower than it was before the conflict began. And I fear the British Airways owner could be about to slide again…

Surging costs

Airlines are among the most vulnerable shares during this Middle East crisis. With oil prices spiking due to supply disruptions, these businesses face a sharp rise in costs. Fuel makes up roughly a quarter of their operating expenses.

Jet fuel prices have more than doubled since the start of the conflict, and were last around $1,530 per tonne. This is even more of an issue as many long-haul routes are covering larger distances by avoiding some Middle East airspace.

But it’s not just higher costs IAG needs to worry about. It’s also facing the prospect of not having enough fuel to get its planes off the ground. On Friday (10 April), the Airports Council International Europe (ACI Europe) told the EU that shortages could emerge within three weeks if the Strait of Hormuz remains closed. That’s according to the Financial Times.

Are there other risks?

The longer the conflict persists, the greater these risks become. But this creates another huge problem — more route disruptions, as key Middle Eastern destinations are avoided.

Flights between Amman, Abu Dhabi, Bahrain, Doha, Dubai, and Tel Aviv have all been impacted in recent weeks. And though IAG plans to restart some in the next several weeks, an escalation of the conflict could scupper these plans.

It’s already warned of “further changes to our flying schedule” on Friday, announcing plans to trim the number of flights to Doha, Dubai, Riyadh, and Tel Aviv from pre-war levels.

Are IAG shares a buy?

Add in the impact of the war on broader inflation and economic growth, and I think things could get very tough for IAG and its shares. Holidays are among the first things consumer trim back on when they’re feeling the pinch. This could potentially prompt the company to slash its profit forecasts, with knock-on effects for the share price.

It is worth noting, however, that the popularity of brands like British Airways could help IAG outperform the broader sector. And with its budget airlines Aer Lingus and Vueling, it might also benefit if cash-strapped customers switch down from premium- and mid-tier operators.

Yet, for me, the risks of owning IAG shares are too high in the current climate. And especially when you consider that fierce competition is also putting the company’s sales and profit margins under huge pressure. On balance, this is a FTSE 100 share to think about avoiding.

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The question now becomes, is this a buying opportunity for long-term investors or a warning to stay away?

What happened to the IAG share price?

The company’s recent share price crash has been driven by three overlapping factors that all hit at nearly the same time.

1. Its 2025 full-year earnings beat expectations, but near-term guidance was murky alongside large planned capital spending, rattling investor confidence.
2. The war in Iran erupted, sending oil and, in turn, jet fuel prices through the roof while also disrupting travel routes through the Middle East.
3. The threat of new US tariffs applying pressure to UK and European economies – something that IAG’s highly sensitive to.

Combining these headwinds with the fact that IAG shares have actually been on a pretty strong bull run over the last couple of years, it isn’t surprising to see some investors lock in profits. And it’s also worth pointing out that even after this recent sell-off, the shares are still up more than 60% over the last 12 months.

However, as a result of this pullback, IAG’s price-to-earnings (P/E) ratio is now deep in value stock territory at just 6.1. And on a forward basis, the shares look even cheaper at a P/E of just 5.6.

So should investors take advantage of weakened sentiment to snap up what appears to be a screaming bargain?

Bull versus bear

Beyond an undemanding valuation, IAG’s business looks fundamentally impressive. As previously mentioned, its 2025 results firmly beat analyst forecasts, with margins reaching record levels. That’s paving the way for plans to return a jaw-dropping €1.5bn to shareholders in the next 12 months, starting with a €500m share buyback programme.

What about the surge in jet fuel prices? Here, there’s some valid concern. For context, the International Air Transport Association’s Jet Fuel Price Monitor shows that the weekly average cost per barrel of jet fuel on 27 February was $99.4. As of 27 March, it’s closer to $195.19 – a 96.4% increase in a single month, just as we approach peak summer travel season.

With a 62% fuel hedge in place, IAG does have some insulation against rising prices. But compared to many of its European peers and rivals, that level of hedging is actually lower than the 70%-80% average. And if the war rages on, 2026 could prove to be a disappointing year against 2025’s stellar results.

The bottom line

IAG’s seemingly in a tough spot. And subsequently, its recent sell-off into value stock territory makes a lot of sense. However, if the war in the Middle East is (hopefully) resolved promptly, then investors may indeed have overacted, creating a buying opportunity.

All things considered, the company remains shrouded in geopolitical uncertainty. And with other airlines seemingly being better equipped to absorb a protracted conflict, it might be worth keeping IAG on a watchlist for now.

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There has been significant re-routing and assets stuck in the wrong place. But it’s also an issue of jet fuel prices.

According to IATA data, the global average jet fuel price stood at $99.40 per barrel in the final week of February. By mid-March it was $175.

By the week ending 27 March, it had hit $195.19 — a near-doubling in five weeks. For an industry where fuel is typically the single largest operating cost, these rises are not background noise.

The benefits of hedging

IAG and its European peers don’t simply buy fuel on the spot market and hope for the best. They hedge. This means buying financial contracts — usually options or swaps — that lock in a price for future fuel purchases months or even years in advance.

It’s like an insurance policy if the prices spike. If prices fall, you’ve overpaid for protection — but most airlines consider that a price worth paying for budget certainty.

IAG looks reasonably well-covered for now. The group had around 75% of its Q1 2026 fuel requirements hedged, falling to roughly 64% in Q2, 58% in Q3, and 50% by Q4.

For the full year, that averages out at about 61%. In other words, the first half of 2026 is largely shielded, but as hedges roll off through the summer and autumn, IAG becomes increasingly exposed to whatever spot prices do next.

And the IATA crack spread — the refining margin between crude oil and jet fuel — has blown out to $81.44 per barrel, up 287% compared to a year ago, suggesting structural pressure beyond just crude.

A better entry point

Strip out the geopolitical noise and the numbers — which is where every investment thesis should start — are attractive.

IAG trades on a forward price-to-earnings of just 5.5 times and an enterprise value-to-EBITDA of 3.16. This is certainly more attractive than it was five weeks ago.

Analyst consensus sits at a price target of €5.70 — implying around 42% potential appreciation from here. Net debt has fallen dramatically, from nearly €10bn in 2021 to under €6bn last year. What’s more, the operating margins are incredibly strong for the sector.

What’s more, it’s also diversified in a way that’s easy to underestimate. British Airways on premium transatlantic routes, Iberia into Latin America, Vueling as a budget European operator, and Aer Lingus offering low-cost transatlantic. Different brands, different cabins, different geographies.

That diversification matters when one market goes cold.

The bottom line

I held IAG as my favourite in the sector for a long time. But after a significant re-rating (surging more than 200%), I shifted attention to Jet2, which I think offers considerably better value once you adjust for the balance sheet — a net cash position that IAG simply can’t match.

On a risk-adjusted basis, Jet2 is the more compelling opportunity to me and appears to be slightly better hedged. Nonetheless, both stocks are worth considering… investors just need to keep one eye on the conflict.

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Over the last month, the company — more commonly known as IAG — has slumped 12.1% in value. It means a £5,000 lump sum invested at the start of the period would be worth £4,395 today, a drop of £605.

The problem is, I think IAG’s share price may have much further to fall.

Cost pressures

With fuel accounting for roughly 20% of total operating costs, the firm’s fortunes are linked closely to how long the Iran war will last, and whether energy supply blockages can be solved in the meantime.

Unfortunately, forecasting either of these outcomes is fraught with uncertainty. Some have predicted the conflict lasting a matter of weeks. But with no obvious ‘off ramp’ for the conflict’s opposing sides, some analysts have said it could last months. Plans to reopen the Strait of Hormuz and get oil shipments flowing again have also failed to materialise.

Oil prices have doubled since the conflict began in late February. Further incredible gains aren’t out of the question, especially if oil infrastructure in the region is targeted again. But this isn’t the only issue for airlines.

What else could go wrong?

Major carriers have warned that higher fuel expenses will cause them to raise fares. The problem is, their ability to effectively do this without decimating ticket sales may be limited amid cost-of-living crises in key markets. IAG’s latest financials underlined growing stress on travellers’ budgets, with sales dropping 0.8% in the final quarter of 2025.

And the Middle East war will stretch many travellers’ budgets beyond breaking points, as those rising oil prices worsen inflationary pressures and prompt central banks to hike interest rates.

IAG’s is best known for its flagship British Airways airline. However, it also has exposure to the budget segment through its Aer Lingus and Vueling brands. Theoretically, this could help support group revenues as people switch down from more expensive carriers.

However, I think said support could be limited. Discretionary spending on travel and holidays typically falls quickly when times get tough. What’s more, IAG’s premium transatlantic services are a key profit driver. And this could be hit especially hard if things get worse.

Could IAG shares rise?

That said, the situation in the Middle East is extremely fluid, and a resolution could give a boost IAG shares. The FTSE 100 stock is certainly cheap enough to encourage investors if things improve — its forward price-to-earnings (P/E) ratio has tumbled to 5.9 times.

Right now, I won’t be buying the travel giant for my portfolio. But that’s not to say it won’t appeal to more adventurous long-term investors.

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What makes me say that given that I wouldn’t describe the British Airways owner as a low-risk stock? In truth, it’s hard to call any airline low risk these days. We live in an uncertain world, where geopolitics, economic shocks and unexpected events can rattle markets at any time. Recent experience suggests airlines are often first in line to take a hit.

They carry huge fixed costs, operating vast fleets of aircraft and employing tens of thousands of staff. IAG, which also owns Aer Lingus, Iberia and Vueling, employs around 75,000 people, flies to 285 destinations, operates more than 600 aircraft and carries over 122m passengers a year.

Exciting blue-chip share

The group is exposed to a wide range of shocks. Rising oil prices push up fuel costs. Air traffic control strikes can disrupt schedules and dent revenues. Delays can trigger compensation claims. Extreme weather and natural disasters can ground flights. And, of course, geopolitical tensions can hit demand overnight. All are beyond management control.

We’re seeing that in the Middle East today, with British Airways suspending flights to Dubai. And that’s before even mentioning the pandemic, which IAG only survived by taking on significant debt and launching a major rights issue.

More recently, markets were shaken by Donald Trump’s so-called Liberation Day tariffs. When they were announced in April last year, global shares plunged, and IAG fell faster than most. When the tariffs were lifted just one week later, I took the opportunity to buy, and quickly found myself sitting on a 70% gain.

IAG was particularly exposed because its profitable transatlantic routes looked vulnerable, with fewer business travellers expected to cross the Atlantic. Yet, as so often, the shares bounced back strongly.

We’re seeing a similar pattern today (1 April). The FTSE 100 was up 1.75% this morning on hopes that the Iran conflict may ease. Whether that optimism proves justified remains unclear. In my view, a meaningful peace deal still looks challenging.

Either way, IAG is leading the charge, rising 5.8% so far. The shares are up 35% over a year, and 95% over two years. But if tensions escalate, IAG is likely to fall faster than most stocks.

Dirt cheap but volatile

Today, the shares look cheap, trading on a price-to-earnings ratio of just 6.8, one of the lowest P/Es in the FTSE 100. I don’t expect that multiple to climb anywhere near the index average of around 17 though. Investors typically demand a discount for stocks with this level of uncertainty. Even so, I see this as an exciting long-term opportunity. Airlines are highly cyclical, and history suggests the best time to buy is when sentiment is weak and prices are under pressure.

Investors should approach with caution, given the stock’s volatile nature. But for those with a long-term outlook and a tolerance for bumps along the way, I think it’s worth considering today. For anyone who finds that level of risk uncomfortable, there are plenty of other FTSE 100 bargains to explore right now.

The post Why I think this super-cheap growth stock will lead the charge when the FTSE 100 recovers appeared first on The Motley Fool UK.

Here are three stocks that have recently caught my eye.

Back down to earth

International Consolidated Airlines Group (LSE:IAG), owner of British Airways and four other operators, is having to cancel flights in the Gulf region, as well as deal with rising fuel costs.

On 12 March, European jet fuel prices hit an all-time high. Although it will have hedged some of its anticipated fuel demand, including up to 75% in the near term (not defined), this additional cost will have to either be absorbed by the group itself — hurting its bottom line — or passed on to customers with the risk of reducing revenue. It’s a lose-lose situation.

But the airline’s stock is currently trading on just six times its 2025 earnings. This could mean an amazing opportunity to buy a quality stock at a knock-down price. Only last month, its shares were changing hands for 20% more. Importantly, its airlines retain strong brands in their respective markets.

On the assumption that things return to normal soon, I think it’s likely to bounce back stronger than most. On this basis, it could be cheap enough to take a position.

Unfashionable

JD Sports Fashion (LSE:JD.) has a price-to-earnings ratio of only 6.3. This is based on analysts’ forecasts for its January 2026 financial year (FY26). Looking ahead to FY28, it drops to 5.8. The five-year average (median) is 15.4.

Problems at Nike, a key partner, are a risk. And another round of US tariffs could be a major issue.

However, a bit like air travel, the sportswear sector has a track record of defying expectations. One forecast I’ve seen expects the global athleisure market to grow by $525bn by 2035.

In its favour, JD Sports sells many brands and is much less UK-centric than it was. Its biggest market is now North America where this year’s World Cup is being held. It also retains a strong balance sheet and is expected to generate over £900m of free cash in FY27 and FY28.

Personally, I don’t think the group’s shares will offer such amazing value for much longer. Therefore, it could be one for long-term investors to consider.

One to bank on?

I’ve long thought that Barclays (LSE:BARC) is undervalued and the recent fall in its share price has reinforced my view.

Its balance sheet at 31 December 2025, disclosed a book value of £78.2bn compared to a current market cap of £54.3bn. This gives it a price-to-book ratio lower than any of the FTSE 100’s banks.

It also shares the joint lowest price-to-earnings ratio on the index. And I can’t see any obvious reason why.

Admittedly, the bank remains vulnerable to a global economic slowdown. Also, a lower interest rate environment could affect its margins. But Barclays has a diversified business model, both in terms of geography and the nature of its activities. This should offer some protection.

In addition, it plans to return £15bn to shareholders from 2026-2028 by way of share buybacks and dividends. On balance, I think value investors could consider taking a stake.

The post The FTSE 100’s full of value shares at the moment. Here are 3 to consider appeared first on The Motley Fool UK.

First, let’s get technical here. A crash is defined as a drop of 20%, in a relatively short space of time. A drop of 10% is a correction. In the last month, the FTSE 100 has fallen just 1.4%. That barely qualifies as a dip. Over 12 months, it’s climbed 20%, with dividends on top. Right now, investors have very little to complain about. That could change, of course.

At The Motley Fool, we aren’t afraid of crashes or corrections. Instead, we see them as opportunities to pick up our favourite stocks, at a reduced price. We accept that short-term volatility is the price we pay for the long-term outperformance of equities.

Some FTSE 100 shares are falling

For investors who buy individual stocks, there are already plenty of buying opportunities out there. Shares in International Consolidated Airlines Group (LSE: IAG), Persimmon, Barratt Redrow, Melrose Industries, and easyJet have all fallen 20% or more in the last month. Where they’re concerned, the crash is here.

Melrose has issues of its own. But the other four are struggling due to fallout from the Middle East. Housebuilders Persimmon and Barratt Redrow have been hit by the assumption that the rising oil price will drive up inflation, and therefore interest rates. Mortgage rates are already rising, making new homes even less affordable.

Investors may see this as an opportunity. Persimmon’s price-to-earnings (P/E) ratio has fallen to a modest 11.8, while its yield has climbed to 4.9%. Similarly, Barratt Redrow has a P/E of 11.1 and yield of 6%. Both look worth considering for investors with a long-term view, but their struggles might continue a while longer.

International Consolidated Airlines Group is falling

Shares in British Airways owner IAG were doing nicely before the Iran war. On 27 February, it reported a 25% jump in operating profit to €5bn in 2025. The board also rewarded investors with plans to return €1.5bn of excess capital.

Weirdly, the shares dropped on the day, because investors were hoping for more. Then Middle East air space filled with drones and missiles, and the IAG share price plunged. British Airways has now cancelled all flights to Dubai until at least May 31.

IAG’s troubles may be an opportunity for investors though, with the P/E ratio falling to 5.7. There are risks, of course. The longer the conflict drags on, the greater the damage to revenues and profits. It also highlights what a risky business running an airline is. Investors should only buy with a long-term view.

Budget carrier easyJet is the worst performer on the FTSE 100 in the last month, down 25%. Its P/E is a dirt-cheap 5.5. This may be a buying opportunity too, for long-term investors willing to take a bit of risk.

The stock market could still crash. If it does, these shares could get cheaper still. But as we’ve seen, it’s completely unpredictable. What we do know is that the FTSE 100 is packed with crashing bargains today. Why wait?

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As you might guess, stocks that reach into the single-digit P/Es are far and few between. And it’s why a certain stock reaching a P/E ratio of close to six seems scarcely believable to me.

Full swing

The stock I am referring to is IAG (LSE: IAG) – the airline group that manages British Airways and several other European airlines. The current P/E ratio is 6.2 – almost the lowest on the entire FTSE 100.

The strangest thing? This was a company on the up and up. The recovery post-pandemic was in full swing and had just posted record earnings in February 2026. At the same time, the firm was back to paying dividends for the first time since Covid-19, and its share price had climbed 363% since a 2022 low.

And then? The awful conflict in Iran erupted. Aside from the humanitarian consequences, this has caused mass cancellations of flights, and early signs are that travellers are looking less adventurous in their bookings. The surging price of oil will impact fuel costs too – one of the most important considerations for an airline.

So there’s the real question. Is this a temporary blip that might be looked at as a bargainous buying opportunity a little down the line? Or are these the warning signs of an upcoming crisis for the firm?

Risk profile

As investors, we do have to grapple with the future and all the wonderful things it can bring us. Often, that can be crises that no one could ever have seen coming. Some call these unknown unknowns, others black swan events. In any case, these kinds of unpredictable happenings are a risk for any company and perhaps a few more so than companies in the business of needing a peaceful and interconnected world, like airlines.

It wasn’t just IAG that crashed after the pandemic grounded flights; it was all airlines. And it’s not just IAG trading cheaply at the moment; easyJet is trading at a similar times number of earnings. The point being: there is a huge risk profile here that is irrespective of what’s going on in the particular company.

With all that said, today’s rock-bottom valuation could be a buying opportunity here should flights get back to normal in the near future. Obviously, that’s not guaranteed. But the latest analyst forecasts are optimistic, with a consensus estimate for the next 12 months forecasting a 39% increase in share price.

That’s why I think investors could consider it if they know what they’re getting into. And if a few cards fall into place, then I’d not be the least bit shocked to see IAG potentially emerge as one of the best buys all the way back in early 2026, later down the line.

The post How on earth is this FTSE 100 household name trading at 6 times earnings? appeared first on The Motley Fool UK.

During that time, a stock will face many risks, as IAG is now facing from the conflict in the Middle East. Its jet fuel costs will rise alongside increases in oil prices. It will be forced to take longer routes on some trips to avoid trouble spots. And several major tourist destinations will effectively be closed.

But ultimately, I believe it has the solid fundamentals to recover and to do so strongly. In essence, it looks to me like the classic short-term-risk/long-term-reward opportunity.

So, how high could it go?

Key growth drivers

Ultimately, it is a company’s ability to generate strong returns from the money invested in it that drives long‑term share price performance.

By end-2028, analysts forecast that IAG’s return on equity will reach a standout 28.7%. That tells me the business is becoming far more efficient, far more profitable per pound of capital, and far better positioned to compound value over time.

This projection looks well-founded to me in the airline’s full-year 2025 results, released on 27 February. Operating profit soared 13.1% to €5bn (£4.34bn), lifting the operating margin to 15.1%, up 1.3 percentage points. This underlined IAG’s ability to convert revenue into bottom‑line earnings despite higher costs.

Free cash flow remained exceptionally strong at €3.1bn, supporting further debt reduction, with net debt falling from €7.5bn to €5.95bn. That pushed net leverage down to just 0.8 times EBITDA, giving IAG one of the strongest balance sheets in the global airline sector. It also creates room for continued investment and shareholder returns.

Capacity increased 2.4% year on year, with Iberia and LEVEL delivering standout performance. Passenger yields rose 1.1%, showing that pricing power remains intact.

Taken together, these trends point to a business with improving efficiency, rising margins and strong cash generation. All of this supports the prospect of sustained value creation over the medium term.

Where ‘should’ the shares be trading?

A discounted cash flow (DCF) analysis identifies where a stock should trade by projecting future cash flows and discounting them back to today. Analysts’ DCF modelling varies — some more bullish than mine, others more bearish — depending on the variables used.

However, based on my bullish DCF assumptions — including a 10% discount rate — IAG shares are 59% undervalued at their current £3.54 price.

This suggests a ‘fair value’ for the shares of around £8.63 — more than double today’s price.

This gap between current price and fair value is crucial for the profits of long-term investors. This is because share prices tend to gravitate to their fair value in the long run.

So the big gap here suggests a potentially terrific buying opportunity to consider today, if those DCF assumptions hold, which is not guaranteed.

My investment view

I focus on high-yield shares, so these — with just a 2.4% dividend return — are not for me.

However, given its strong fundamentals and deep undervaluation, I think it merits serious attention from other long-term investors.

The post Down 17% on short-term risks, here’s why IAG’s share price looks deeply undervalued long term appeared first on The Motley Fool UK.

That’s what people are saying, anyway. And it’s true that, for the above reasons, the markets are looking more fragile than they have in perhaps years. But guess what? I’m not worried.

Get greedy

In the 2020s so far, there have been three periods of extreme pessimism around stocks and shares not including the current malaise. I’m referring to March 2020 in the midst of the pandemic, October 2022 when a certain Ms Truss was drawing comparisons to a wilting vegetable, and April 2025 when another brash and blonde leader of a country was talking a lot about tariffs.

Do you know what’s funny? Those were the three best buying opportunities in recent years too. Many stocks were selling at bargain basement prices. Even the slower-growing FTSE 100 had plenty of stocks double or triple in value in a short amount of time.

What’s the Warren Buffett quote again? “Be fearful when others are greedy and greedy when others are fearful.” The best strategy when the chips are down – as history tells us – is to keep buying. And cautious investors maye wish to keep a small portion of their holdings in cash to take advantage of any dips.

With all that said, this is one of those things that’s a lot easier in theory than in practice. I remember being very worried about my shrinking life savings when Covid was threatening to destroy the world economy in 2020. And market crashes can have terrible consequences like company closures or job losses too.

Cheap offerings?

One stock I’ve added to my watchlist recently is International Consolidated Airlines (LSE: IAG) – the airline group that controls British Airways, Iberia and Vueling. While my exposure to similar stocks has prevented me from buying yet, this might have to change if the share price falls much further.

Why? Because the mass cancellation of flights due to the awful goings on in the Middle East has brought the share price down by 22% in a couple of weeks. The price-to-earnings (P/E) ratio has dropped to 6.2 when the FTSE 100 average is around 18. If you take a look at some of the stocks with low-single-digit P/Es from the last few years, you’ll find many of them have surged thereafter.

There are no guarantees, of course. Holiday bookings have already taken a downturn since the start of the Iran crisis. Earnings may drop in the years to come and that low P/E may look justified.

But none of us can predict a stock market crash ahead of time. That’s why I’m preparing for both good and bad outcomes, and that means keeping abreast of possible stocks like IAG that could offer above-average market returns for years to come.

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