International Consolidated Airlines (LSE:IAG) have hit turbulence in 2026. Over the last three months, the stock’s slipped just over 10% as investors digest a nasty mix of surging jet fuel costs and fresh uncertainty over the global travel outlook.

Yet underneath the volatility, the business is still making healthy profits. So are investors right to be nervous? Or has this slump created an exciting buying opportunity?

Why are IAG shares under pressure?

The core problem is the war in Iran. The conflict has pushed jet fuel prices sharply higher by disrupting supply through the Strait of Hormuz – a key chokepoint for global oil and gas. Because fuel typically makes up around 30% of an airline’s operating costs, even modest price increases can hammer profits.

For IAG, that impact is far from modest. Management now expects its 2026 fuel bill to hit about €9bn, up roughly €2bn from 2025, and has warned that profits and free cash flow will likely come in below earlier guidance as a result.

This geopolitically triggered profit warning is a real shame, given that IAG actually reported a pretty strong start to the year. First-quarter revenue rose to €7,181m, while operating profit jumped 77% to €351m on the back of robust demand.

However, management hasn’t been idle. To soften the blow, IAG has leaned on fuel hedging and capacity tweaks.

Around 70% of its expected 2026 fuel needs are already hedged. It has also redeployed some Middle East capacity into higher-demand routes such as North America, Asia and leisure destinations.

Even so, the remaining unhedged exposure is enough to dent profits. And that’s what investors are currently panicking about.

Is this dip a buying opportunity?

The argument to buy IAG shares starts with demand and positioning.

IAG runs a portfolio of strong brands, including British Airways, Iberia and Aer Lingus. And the firm retains a particularly powerful exposure to the lucrative North Atlantic corridor, where premium cabin demand has been “robust”, structurally supporting higher margins.

In fact, this advantage is why some institutional analysts such as Morgan Stanley and Barclays have actually raised their share price targets this month, even with the uncertain backdrop.

However, that doesn’t mean IAG’s a guaranteed winner. If the conflict and supply disruptions keep jet fuel elevated for longer than expected, hedges will gradually roll off, and more of the pain will hit the bottom line.

At the same time, any slowdown in global travel, especially on long-haul and premium routes, will make it harder for IAG to pass on higher costs through fares without losing passengers.

So where does that leave investors today? Personally, I find this set-up very interesting. IAG shares are falling because the market’s repricing a clear and quantifiable fuel shock, not because the underlying business has suddenly lost its edge.

If fuel costs stabilise and demand stays resilient, today’s pullback could look like a rare chance to pick up a structurally stronger airline at a markdown. For now, I think this is one worth keeping firmly on the watchlist.

But for bolder investors with a high-risk tolerance, now might be the time to consider drip feeding in some capital.

Should you invest £5,000 in International Consolidated Airlines Group right now?

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Zaven Boyrazian does not hold any positions in the companies mentioned.