LONDON, March 4, 2026, 09:26 GMT
- IAG shares dropped 5.4% on Tuesday, with airline stocks under pressure from rising fuel prices and ongoing disruption in the Middle East.
- With heavy restrictions or outright closures at key Gulf hubs, airlines rerouted flights, canceled others, and left travelers stuck.
- Insurers and analysts caution that airlines could be on the hook for lost revenue if the disruption stretches out.
British Airways parent IAG (ICAG.L) dropped another 5.4% Tuesday, deepening its recent slide as airline stocks took another hit from spiking fuel costs and a fourth day of turbulence in the Middle East. “If higher energy prices squeeze real incomes and prevent the Bank from cutting rates, hopes would be dashed,” warned David Rees, head of global economics at Schroders, while UK assets continued to come under pressure. Reuters
The timing is critical: Gulf hubs are a key link between Europe and Asia, and with them offline, airlines have been forced to scrap flights or plot out longer, fuel-hungry routes. On Monday, Reuters calculations tallied $22.6 billion wiped from the market caps of 29 major airlines, hotel, and travel stocks spanning Europe, Asia, and North America, after oil prices surged up to 13% and analysts started sounding alarms over potential weeks of turmoil ahead. “If the reduction in tanker traffic continues for a week or so it will be historic,” said Jim Burkhard, who oversees crude oil research at S&P. Reuters
The numbers keep climbing. Since the strikes started, Flightradar24 tracked around 21,300 cancellations at seven key airports—Dubai, Doha, Abu Dhabi among them—according to Reuters. Dubai and others either shut down or operated under heavy restrictions for a fourth straight day. “It’s pretty well the biggest shutdown we’ve seen certainly since the COVID pandemic,” said Paul Charles, CEO at PC Agency, who also warned the hit to cargo alone would run into “billions of dollars.” Reuters
IAG is feeling the pinch directly now. The Foreign Office announced a charter out of Muscat, departing at 1900 GMT Wednesday. British Airways, meanwhile, can’t operate flights from Dubai, Doha, Abu Dhabi, Bahrain, Amman or Tel Aviv, and will instead run a separate service from Oman in the early hours of Thursday, local time.
IAG runs multiple airlines out of the UK—British Airways, Iberia, Vueling, Aer Lingus, plus IAG Loyalty. A snag in any one of these routes doesn’t stay contained; ripple effects hit timetables, expenses, and the way customers are managed across all its brands.
Selling pressure hit more than just IAG. Wizz Air, Lufthansa, Air France-KLM and IAG all dropped between 5% and 8% across Europe on Tuesday. Cirium counted more than 19,000 Middle East flight cancellations since Saturday. According to Karen Li, who leads Asia infrastructure, industrials and transport research at J.P. Morgan, “important differences across carriers” — everything from hedging strategies to rerouting flexibility — will define the impact as things develop. Reuters
Fuel hedging can swing the numbers. By locking in prices through contracts, airlines cushion themselves from oil shocks. EasyJet has already hedged 84% of its fuel for the first half of 2026. Wizz Air is covering 83% of its jet-fuel through March 2026. Ryanair’s CEO, for his part, put most of the carrier’s fuel needs under hedge at roughly $67 a barrel.
But there are complications here. According to industry sources and analysts, airline revenue lost to operational disruption usually isn’t insured—most business policies specifically exclude war. That means carriers end up footing the costs themselves. Jefferies has pointed out that aviation war cover can be pulled by insurers with little notice. Morningstar DBRS, for its part, highlights the threat of major hull and liability claims if missiles or interceptors strike an aircraft.
IAG entered the week riding a wave of momentum, fresh off reporting annual operating profit of 5.02 billion euros. The company also laid out plans to hand 1.5 billion euros back to shareholders over the next year, beginning with a 500 million euro buyback. Chief Executive Luis Gallego said on a media call, “Since Q3 we have seen a rebound.” Reuters
The airspace shock has punctured that narrative. IAG shares dropped 5.4% to 400.9 pence on Monday, according to Proactive Investors. FlightAware tracked 1,239 flights cancelled early in the day, following nearly 6,000 cancellations over the weekend.
What’s next? It all hangs on when the hubs come back online, and if oil keeps its upward push. Weeks of disruption would mean a steady thump of rerouting, refund headaches, and pricier fuel for airlines—investors will be quick to separate the winners from the weak links.
