Global Airline Stocks Plummet Up to 12% Amid US-Iran Conflict Escalation

Global Airline Stocks Plunge Amid US-Iran Conflict

Market Update

On March 2, global airline stocks experienced a significant decline, with key players such as Cathay Pacific, AirAsia X, Singapore Airlines, and Qantas Airways plummeting up to 12% in intraday deals. The US-Iran conflict has dealt a double blow to the aviation sector, contributing to a spike in crude oil prices and travel disruptions.

Oil Price Impact

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Crude oil prices surged to their highest since January 2025, trading at approximately $76 per barrel, a 5% increase. Brent futures rose 13% in early trade. According to Harshal Dasani of INVasset PMS, fuel accounts for a significant portion of airline operating costs, directly compressing margins with any sustained spike in oil prices.

Travel Disruptions

Several airlines cancelled flights to the Middle East as key hubs, including Dubai International Airport, Kuwait's main airport, and Abu Dhabi Airport, were shut. Singapore Airlines cancelled flights to and from Dubai through March 7, while Japan Airlines suspended its Tokyo-Doha flights. Cathay Pacific cancelled all flights to the Middle East, including passenger services to Dubai and Riyadh, until further notice.

Airline Stocks Tumble

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Against this backdrop, aviation stocks nosedived. AirAsia X emerged as the worst performer, losing over 12%. Qantas share price lost 10.4% to hit the lowest level in 10 months, before paring some losses to trade down about 6%. Other aviation companies, including EVA Airways, China Airlines, China Southern Airlines Company, and Air China, along with Singapore Airlines and Cathay Pacific, were down 6-7%.

Market Reaction

The sharp sell-off in Asian airline shares reflects market concerns over higher fuel costs, flight cancellations, and incremental costs from rerouting flights following airspace and airport closures. IndiGo and SpiceJet shares also faced a selloff, losing up to 5%. According to JM Financial, the escalation of conflict in the Middle East presents a near-term negative for IndiGo, driven by disruption to Gulf airspace and potential operational constraints at Dubai. A geopolitical spike in crude oil prices poses margin risk given IndiGo's high fuel cost sensitivity and limited hedging.