Rolls-Royce Grounds a Hydrogen Milestone as Geopolitical Headwinds Rattle Aviation Sentiment

Rolls-Royce has delivered a genuine technological breakthrough—successfully running a Pearl-15 engine on 100% hydrogen at full takeoff thrust—only to see its shares punished by concerns that the US-Iran conflict will throttle the civil aviation recovery. The stock closed the week at €13.23, a 3.98% slide on Friday alone and a 6.12% weekly loss, leaving the equity nearly 17% below the all-time high of €15.92 set in late February.

The engineering achievement, reached with partner easyJet at NASA’s Stennis Space Center in Mississippi, saw a modified Pearl-15 gas turbine complete a simulated flight cycle from startup to landing using pure gaseous hydrogen. Chief engineer Adam Newman said the team has developed “the clearest understanding in the industry” of how hydrogen behaves inside a modern aero engine. The insights are already feeding into future programmes such as UltraFan, although Rolls-Royce acknowledges that commercial hydrogen-powered jets remain years away due to unresolved challenges in storage, infrastructure, airframe design, and certification.

Investors, however, have other priorities. The escalating conflict between the US and Iran has raised the spectre of kerosene shortages, route closures, and flight cancellations across Europe and the Middle East—a scenario that directly threatens Rolls-Royce’s aftermarket business, which is heavily tied to engine flying hours. The sell-off is not isolated: peers GE Aerospace and Safran have suffered comparable falls.

Operationally, the company has yet to see any deviation from its trajectory. Large engine flying hours rose 5% in the first quarter, reaching 115% of pre-pandemic levels, and management is targeting 115-120% for the full year. The 2026 guidance remains intact: an operating profit of £4.0-4.2 billion and free cash flow of £3.6-3.8 billion. Defence and Power Systems—the latter buoyed by demand for data-centre power supply—continue to build order books.

Should investors sell immediately? Or is it worth buying Rolls-Royce?

Analysts are holding their ground. Fourteen recommend buying the stock, and none advise selling. The average 12-month price target stands at 1,412.90 pence, with the most bullish forecast at 1,740 pence. Meanwhile, Rolls-Royce’s improving credit profile is supported by recent upgrades from Moody’s and Fitch, partly driven by the repayment of a €750 million bond from free cash flow. The group has also returned to the euro bond market to reinforce its liquidity buffer against a prolonged downturn.

Technically, the shares are caught in a precarious zone. They have slipped below both the 50-day and 100-day moving averages, clinging just above the 200-day line at €13.63. The relative strength index sits near 50, offering no clear directional signal. Chart watchers peg a critical support level at around 1,100 pence (equivalent to roughly €12.75); a double-bottom formation there could open a path back to the resistance near 1,210 pence. If that floor gives way, the psychological 1,000-pence mark comes into view.

For now, the hydrogen test gives the long-term narrative fresh weight, but the market is fixated on near-term risks. Rolls-Royce needs a de-escalation in the Middle East as much as it needs to keep investing in the technologies that will define the next era of flight. The next test is not on a test stand in Mississippi, but in the geopolitics of the Straits of Hormuz and the skies above Tel Aviv.