Rolls-Royce share price at a crossroads amid Middle East conflict

Rolls-Royce is on edge today, March 2, as investors reflect on the ongoing war in the Middle East and its impact on the business. RR stock was trading at 1,335p on Monday, down slightly from the year-to-date high of 1,420p.

Rolls-Royce Holdings business to be impacted by war

The Rolls-Royce stock price was in the spotlight on Monday as investors bought the recent dip amid the ongoing war in the Middle East.

This war will have a major impact on the company in two ways. First, its defense business may benefit from the increased spending in Europe, the Middle East, and in the United States.

At the same time, its crucial civil aviation could be impacted by the ongoing travel restrictions in the Middle East, which have affected most of its large clients like Turkish Airlines, Delta, Air India, and British Airways.

Rolls-Royce charges these companies using the flying hours approach, meaning that it does not make much money when the engines are not flying.

It is unclear when flying will normalize in the Middle East as Iran has opposed any negotiations with the United States despite Trump claiming that its leaders were calling the White House. 

Analysts believe that any negotiations and a swift end to this war will put Iran at a disadvantage by allowing the United States and Israel to replenish their weapons and launch another attack at a later date.

Rolls Royce business is thriving 

The new crisis is happening a week after Rolls-Royce Holdings published strong financial results, which were better than estimates.

Rolls-Royce Holdings said that its underlying profit rose to £3.5 billion from £2.5 billion in 2024. This growth was driven by the civil aviation segment, which continued to increase the LTSA margins and revenue.

Additionally, the management upgraded the mid-term targets once again. It now expects that its operating profit will be between £4.5 billion and £5.2 billion in 2028, up sharply from the £4.0 billion and £4.2 billion it expects to make this year.

The company also anticipates that its operating margin will rise to between 18% and 20%, while its free cash flow will surge to between £5 billion and £5.3 billion. These numbers mean that the company's turnaround measures are working.

Its civil aviation business made £10.2 billion in revenue, up by 15% from the previous period. Its operating margin rose to 20.5% from the previous 16.6%.

The defense business, which will benefit from the ongoing war in Iran, made £4.77 billion, up by 8% from the same previous period. Its operating margin rose from 14.2% to 14.4%. 

Rolls-Royce is also benefiting from the ongoing AI build up as its power segment revenue rose by 19% to over £4.9 billion. The management is working on a new power product focused on the data center business.

Most importantly for investors, it announced a £2.5 billion share buyback for this year and between £7 billion and £9 billion for the 2026 and 2028 financial year.

Rolls-Royce share price technical analysis

The daily timeframe chart shows that the RR stock price pulled back from the all-time high of 1,420p to the current 1,330. This retreat happened as investors booked profits since the strong financial results were priced in. 

It remains above the 50-day and 100-day Exponential Moving Averages (EMA). It also remains above the key support level at 1,307p, its highest level in January.

Therefore, the most likely scenario is where it continues rising as bulls target the next key support target level at 1,410p, its highest level last week.