Key Highlights

  • International Consolidated Airlines Group SA (LSE:IAG) is in focus as Brent crude rose to about $116 a barrel on 28 October 2026.
  • IAG has said its 2026 jet fuel bill will be just over $10.5 billion, with capacity growth lower than first guided.
  • The group remains partially hedged, but higher fuel costs have pushed fares up and weighed on profits this year.
  • Third-quarter results are the next catalyst, with investors focused on yields, fuel guidance and shareholder returns.

Why IAG Is in Focus Today

International Consolidated Airlines Group SA (LSE:IAG), owner of British Airways, Iberia, Aer Lingus and Vueling, is in focus on 28 October 2026 as oil prices climbed again. Brent crude rose to about $116.37 a barrel from $114.13 the previous day, keeping the cost of jet fuel at the centre of investor attention ahead of the airline group's third-quarter results.

Fuel is typically an airline's largest single cost, often around a third of operating expenses. IAG has already warned this year that higher fuel prices linked to the Middle East conflict would weigh on earnings, and it lowered its capacity growth plans below the 3% increase originally guided.

How the Middle East Conflict Changed 2026

IAG entered 2026 after solid results for 2025, supported by premium transatlantic demand and lower fuel costs. The outbreak of conflict involving Iran changed that picture. Before the conflict, around 3% of capacity was exposed to the Gulf region, mainly through British Airways, but the bigger impact came through fuel prices.

The group said its jet fuel bill would be just over $10.5 billion this year and that free cash flow would be lower than previously projected. It also signalled that airfares would likely continue to rise to offset costs. IAG (LSE:IAG) has hedging in place that partially offsets higher spot prices, which helped cushion results earlier in the year.

Demand Remains Supportive

Despite higher fares, demand for travel has stayed resilient in many markets. Premium and corporate bookings at British Airways have been a source of strength, and transatlantic routes remain profitable. Leisure demand to European destinations has also been solid.

However, there are pressure points. Aer Lingus and Vueling have faced higher fuel costs and competition, while consumer confidence in the UK has weakened. Investors will watch whether higher fares start to reduce demand in price-sensitive segments.

Budget and Macro Backdrop

The UK Budget on 28 October did not deliver major changes for airlines, and the FTSE 100 closed slightly higher at 10,694.50. Sterling was little changed at about $1.33, which matters because IAG reports in euros and pays for fuel largely in US dollars.

Lower crude prices earlier in the week had briefly helped transport stocks, but the rebound in oil on Wednesday highlighted how quickly that support can reverse. The US Federal Reserve decision and global economic data will influence fuel markets and travel demand.

What Investors Are Watching Next

The next catalyst is IAG's third-quarter results, expected in early November. Investors will focus on passenger unit revenue, fuel cost guidance for the fourth quarter and 2027, hedging levels, capacity plans and forward bookings for winter.

Shareholder returns will also be in focus. IAG has used buybacks and dividends in recent years, and any change to these plans would signal management's view on cash generation in a high fuel-cost environment. Fleet delivery delays and engine reliability issues across the industry are additional factors.

Valuation and Recent Performance

IAG shares delivered a solid run in 2025, supported by record profits, debt reduction and generous shareholder returns. In 2026, the picture has been more mixed as fuel prices surged and guidance was trimmed. The shares have become more volatile, often moving in step with oil prices and headlines from the Middle East.

Investors also compare IAG (LSE:IAG) with European peers such as Lufthansa and Air France-KLM, which have flagged similar fuel cost increases. IAG's higher exposure to premium transatlantic travel has historically supported higher margins, a key reason many investors see it as a relatively resilient operator in a difficult environment.

Risks and Outlook

The main risks for IAG (LSE:IAG) are a further spike in oil prices, a slowdown in consumer demand, labour disruptions and supply chain constraints. On the positive side, solid premium demand, disciplined capacity and pricing power give the group tools to manage costs.

For now, the shares are closely tracking oil price moves. A stable or falling fuel price would ease pressure on margins, while continued escalation in the Middle East would keep IAG under scrutiny heading into 2027.