I vote for 4 seats in economy. 16 monthers can be squirmy. They'll be used to car seats and should handle sleeping in them well. And you'll have hours of free arms, vs maybe minutes. And you'll all be able to sit together.

I would imagine Iberia doesn't allow rear-facing seats, but you could forward-face them, assuming the seats are convertible, for the flights if need be -- and assuming they allow car seats at all. Some airlines don't.

Are your girls small for their age -- or at least not big? You might be able to request bulkhead seats and bassinets for them for sleeping. Then Business might be an option. But then again, when they're awake, you'd have no free hands.