Investors who expected the Iran war to trigger a stock market crash may be surprised by its relative calm. What’s happening out there?
First, let’s get technical here. A crash is defined as a drop of 20%, in a relatively short space of time. A drop of 10% is a correction. In the last month, the FTSE 100 has fallen just 1.4%. That barely qualifies as a dip. Over 12 months, it’s climbed 20%, with dividends on top. Right now, investors have very little to complain about. That could change, of course.
At The Motley Fool, we aren’t afraid of crashes or corrections. Instead, we see them as opportunities to pick up our favourite stocks, at a reduced price. We accept that short-term volatility is the price we pay for the long-term outperformance of equities.
For investors who buy individual stocks, there are already plenty of buying opportunities out there. Shares in International Consolidated Airlines Group (LSE: IAG), Persimmon, Barratt Redrow, Melrose Industries, and easyJet have all fallen 20% or more in the last month. Where they’re concerned, the crash is here.
Melrose has issues of its own. But the other four are struggling due to fallout from the Middle East. Housebuilders Persimmon and Barratt Redrow have been hit by the assumption that the rising oil price will drive up inflation, and therefore interest rates. Mortgage rates are already rising, making new homes even less affordable.
Investors may see this as an opportunity. Persimmon’s price-to-earnings (P/E) ratio has fallen to a modest 11.8, while its yield has climbed to 4.9%. Similarly, Barratt Redrow has a P/E of 11.1 and yield of 6%. Both look worth considering for investors with a long-term view, but their struggles might continue a while longer.
Shares in British Airways owner IAG were doing nicely before the Iran war. On 27 February, it reported a 25% jump in operating profit to €5bn in 2025. The board also rewarded investors with plans to return €1.5bn of excess capital.
Weirdly, the shares dropped on the day, because investors were hoping for more. Then Middle East air space filled with drones and missiles, and the IAG share price plunged. British Airways has now cancelled all flights to Dubai until at least May 31.
IAG’s troubles may be an opportunity for investors though, with the P/E ratio falling to 5.7. There are risks, of course. The longer the conflict drags on, the greater the damage to revenues and profits. It also highlights what a risky business running an airline is. Investors should only buy with a long-term view.
