Airline stocks sink worldwide as Middle East conflict unleashes travel turmoil

Tuesday 03 - 10:00

By: Dakir Madiha

Airline stocks sink worldwide as Middle East conflict unleashes travel turmoil

Airline and travel shares across global markets slumped after the conflict involving the United States, Israel, and Iran shut key Middle Eastern hubs, triggered thousands of flight cancellations, and drove fuel costs sharply higher. A basket of major airlines, hotel groups, and travel operators in Europe, Asia, and North America lost about 22.6 billion dollars in market value in one session, which analysts described as the worst aviation shock since the Covid-19 crisis. The selloff followed coordinated strikes by the United States and Israel on Iranian targets and subsequent retaliatory attacks across the Gulf region, prompting at least eight countries to close their airspace and disrupting established flight corridors between Europe, Asia, and Africa. Dubai International Airport and Doha’s Hamad International Airport, two of the world’s most important long haul hubs, remained largely closed for a third straight day, leaving tens of thousands of passengers stranded and forcing airlines to improvise detours over longer and more expensive routes.

Carriers came under pressure in every major region. In the United States, shares of American Airlines, United Airlines, and Delta Air Lines each fell more than 6 percent in early trading before trimming losses later in the session, while Alaska Air Group was down around 5 percent. European airline and tourism groups also slid, with Lufthansa, IAG, and Air France KLM all recording declines of between about 5 and 9 percent, and travel giant TUI and low cost carrier Wizz Air among the worst hit names after banks flagged Wizz’s heavy exposure to routes serving Israel. In Asia, Qantas shares dropped more than 10 percent at the open in Sydney before recovering part of the loss, even though the Australian flag carrier does not operate direct flights to the Middle East, while Cathay Pacific, Singapore Airlines, and Japan Airlines also fell as investors priced in higher costs and operational disruption. Indian airlines were hit hard as well, with IndiGo parent InterGlobe Aviation and low cost carrier SpiceJet both sliding more than 7 percent amid a wave of cancellations on Middle Eastern routes that are critical for transporting migrant workers and other outbound passengers.

The market rout coincided with a sharp jump in oil prices that threatens to erode airline earnings. Brent crude rose as much as 13 percent to a new 52 week high, and was last up around 9 percent on the day, as traders weighed the risk that fighting could disrupt shipping through the Strait of Hormuz, the narrow chokepoint that carries roughly one fifth of the world’s seaborne oil and gas. Analysts warned that a sustained move higher in crude would quickly feed through to jet fuel costs, a major line item for carriers already facing slowing demand on some routes and rising wage bills after the pandemic.

Flight cancellations and rerouting compounded the financial hit. Aviation data provider Cirium estimated that at least 4,000 flights were cancelled globally over a three day period, though the real tally is likely higher once diversions and partial schedule cuts are included. Cathay Pacific suspended all services to the Middle East, Singapore Airlines extended the suspension of its Dubai flights through 7 March, and Japan Airlines halted its Tokyo to Doha route, while Indian budget carrier IndiGo cancelled all Middle Eastern flights and offered passengers full refunds or free rebooking. Analysts said Asian airlines, in particular, are juggling higher fuel bills, lost revenue from cancelled services, and extra costs from longer routings, although many have partial fuel hedges in place that could soften the blow if prices stay elevated for only a short period.

President Donald Trump said he expects the military campaign to continue for four to five weeks, a timeline that has deepened investor concern that airspace closures and route disruptions could persist well into the spring travel season. Market strategists said airlines with strong balance sheets, diversified networks, and robust fuel hedging programmes are better positioned to ride out the shock, but warned that an extended conflict or a further spike in oil could force weaker carriers to cut capacity, raise fares, or seek fresh capital.