IAG profits soar 77% in Q1 2026 but Middle East conflict clouds outlook
British Airways owner IAG has reported a strong start to 2026 with profits rising by over 77% in the first three months. However, the ongoing conflict in the Middle East has cast uncertainty over its earnings for the rest of the year. The group expects jet fuel costs to reach €9bn for 2026, far higher than previously anticipated. IAG’s first-quarter profits soared despite the Middle East conflict affecting the final 30 days of the reporting period. The company has moved to reassure passengers, playing down concerns about a jet fuel shortage causing summer flight cancellations. Around 70% of its fuel is hedged at pre-war prices until the end of 2026, offering some protection against short-term supply shocks.
The group still faces financial pressure from rising fuel costs. It plans to recover about 60% of the extra expense through revenue adjustments and cost management. Passing higher fuel prices on to consumers remains a possibility. Analysts at Goldman Sachs have warned that UK airline fuel inventories could drop to critical levels if the Strait of Hormuz stays closed.
Market confidence in IAG’s full recovery remains low until the Middle East conflict eases. The company now expects lower profits for 2026 than initially forecast due to the sustained high fuel prices. IAG’s first-quarter results show resilience, but the Middle East conflict continues to weigh on its outlook. The group’s hedging strategy provides some stability, yet fuel costs and supply risks remain key challenges. Profits for the year are now set to fall short of earlier estimates.
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