IAG share price continued its strong sell-off today, reaching its lowest level since June 11 this year. It has slumped by 17.8% from the year-to-date high, and this sell-off may continue as crude oil prices rally.
IAG Share Price Drops as Jet Fuel Costs Jump
International Consolidated Airlines (IAG), the parent company of British Airways, is in a steep sell-off this year. One reason for this is that jet fuel prices are rising. IATA data shows that the average jet fuel price has jumped by 4% in the last month.
These fuel prices will continue rising as Brent and the WTI surge . Brent, the global benchmark, rose to $114, while the WTI benchmark has risen to $100 as concerns about the Middle East have escalated.
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Higher fuel prices are having an impact on airlines. In its results this week, United Airlines said that its profit will be much lower than expectation because of the surging energy prices. The company said that, while fare prices are rising, fuel costs are rising at a faster pace.
Other airlines like Delta and Alaska Airlines warned of the same. While these are American airlines, the reality is that the same fuel issues are happening in Europe. The only difference is that IAG uses hedging strategies while its American counterparts don’t. As such, it is less exposed to the fuel crisis.
The other risk is that Iran has put countries in the Middle East on notice. Its leaders have warned that they will hit airports in the region if Trump and Netanyahu resumes their bombing campaign, which may happen after the midterm election. Such a move will affect travel in the Middle East, where IAG has a small market share.
IAG Stock Has Fallen Below Key Support
IAG stock chart | Source: TradingView
Technical analysis suggests that IAG stock may drop further in the near term. It is about to drop below the crucial support level of 403p, which has coincided with the lowest swing on February 14. Moving below that level will invalidate the double-bottom pattern and point to more downside.
The stock has slumped below the 50-day and 100-day moving average, a sign that bears remain in control. Therefore, the most likely scenario is where it continues falling, potentially to the key support level of 350p, its lowest level in May this year. On the other hand, a jump above the resistance at 420p will invalidate the bearish outlook.
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The post IAG Share Price at Risk as United, Delta Flag Jet Fuel Crisis: Will it Crash to 350p? appeared first in UK on InvestingCube .
