The IAG share price has retreated in the past few days, moving from this month’s high of 343p to 310p today, its lowest level since May 12. It has dropped by 15% from its highest point this year, meaning that it has moved into a technical correction. Here’s why it has crashed in the past few weeks.
British Airways cancels flights
The IAG share price retreated as concerns about sales continued as British Airways, its biggest arm, canceled flights to holiday hotspots, including Dubai and Qatar, amid the rising geopolitical tensions in the Middle East.
These flight cancellations will likely have an impact on its business because of the significance of these routes. In a statement, BA said:
“As a result of recent events, we have adjusted our flight schedule to ensure the safety of our customers and crew, which is always our top priority. We are contacting our customers to advise them of their options while we work through this developing situation.”
On the positive side, these cancellations often take a few days or weeks depending on how they develop. Most notably, there is a likelihood that Iran will want to limit its response to US bombing because its leaders don’t want further escalation.
Soaring jet fuel prices
IAG share price has crashed because of the rising jet fuel prices, which will likely impact its margins over time.
WTI and Brent crude oil price have been in a strong rally in the past few months. Brent surged from the year-to-date low of $58 to over $80 today, while WTI spiked from $55.20 to $75.
This, in turn, will lead to higher fuel prices for IAG’s brands. IATA data shows that the average jet oil price stood at $200 per gallon, a 2.7% increase from the previous month and 2.2% increase from a week earlier.
Most of this increase came from Europe, where the average price jumped by 3.7% MoM to $205. While airlines are great at hedging, higher oil prices will likely have an impact on its earnings.
The most recent results showed that IAG’s revenue rose by 9.6% in the first quarter to €7.045 billion. Its operating profit jumped from €68 million to €198 million.
IAG share price technical analysis
The daily chart shows that the IAG stock price bottomed at 209p in April after Donald Trump announced his retaliatory tariffs. It then bounced back and moved to a high of 343p, its highest point on June 11. This was its highest point since March 3.
IAG share price then formed a double-top-like chart pattern with a neckline at 209p. It has also formed a rising wedge pattern, comprising of two ascending and confluencing trendlines.
IAG stock has moved below the 50-day and 25-day Exponential Moving Averages (EMA). Therefore, the stock will likely continue falling as sellers target the psychological point at 300p.
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