IAG and Rolls-Royce Rally on Falling Oil and Fuel Prices

Shares in International Consolidated Airlines Group climbed to 488p and Rolls‑Royce briefly reached a record 1,532p this month before pulling back to 1,426p. Falling crude and jet fuel prices and a rebound in civil aviation contributed to gains for both stocks.

Brent and West Texas Intermediate crude fell to their lowest levels since February after renewed talks between the US and Iran in Switzerland and the resumption of flows through the Strait of Hormuz. Average jet fuel settled at $119.17 per barrel, about 24% lower month on month, reducing a major operating cost for carriers.

IAG, owner of British Airways and Aer Lingus, reported first‑quarter revenue of €7.18 billion, up 1.9%, and operating profit rose by 77.3%, moving its operating margin to 4.9%. The stock is up 14.5% year‑to‑date.

Broader airline shares have also risen. The US Global Jets ETF, which tracks large US carriers, climbed to $32.50, roughly 40% above its low this year.

Rolls‑Royce’s share price has risen about 23% so far in the year. Civil aviation activity has returned to pre‑conflict levels, increasing demand for long‑term engine servicing contracts that generate recurring revenue. Company management has set an operating profit target of £4.0 billion to £4.2 billion and free cash flow expectations of £3.6 billion to £3.8 billion for the year.

Other factors cited by investors include lower aluminium prices, down about 16% from earlier highs, and stronger demand for power systems from data centres. Rolls‑Royce’s power backlog reached around £7.3 billion, and the firm won a bid related to a Swedish small modular reactor project.

Both IAG and Rolls‑Royce have outperformed the FTSE 100, which is up close to 5% year‑to‑date. Further changes in oil prices and the pace of aviation demand recovery will affect the outlook for airline and engine‑service stocks.