You are still within Minimum connection time.

http://www.iberia.com/fly-with-iberi...d/?language=en

I wuold leave it and worst case get booked on another IB or VY flight within an hour or so.

MAD T4 is the biggest terminal I know purpose built with Schengen in mind. It's really just a long hall and is just like US airports in that you deplane directly into the departures area. Try to get a seat toward the front and you should be more than fine.

Even if the checked luggage doesn't make it, there is a decent chance it will and you wouldn't lose any more time than you would have by changing in the first place and you shouldn't have to wait too long for the next flight that will have your bag.