US Airline Stocks Plummet Amid West Asia Conflict-Driven Crude Price Surge
US-Listed Airline Stocks Plummet as Crude Oil Prices Surge
US-listed airline stocks took a significant hit on Monday, following a sharp increase in crude oil prices. The surge in oil prices was triggered by the collapse of weekend peace talks between the US and Iran, which raised tensions in the region. The benchmark US crude price jumped $9.43, or 10%, to $103.69 a barrel, while Brent crude, the international benchmark, rose $7.04, or 7.4%, to $102.24 a barrel.
The aviation industry is highly sensitive to crude oil prices, as fuel accounts for over 50% of operating expenses. The rise in oil prices immediately impacted profit margins, causing shares of major airlines to plummet. Delta Air Lines shares tumbled 3.2%, extending their losing streak to a third straight session, while American Airlines Group, United Airlines Holdings, and Southwest Airlines all fell more than 2.5%. Other airlines, including Alaska Air Group, JetBlue Airways, and SkyWest, were also trading in the red.
The breakdown in peace talks between the US and Iran has led to renewed tensions in the region. The US has begun blocking ships from entering or exiting Iranian ports in the Strait of Hormuz, in an attempt to pressure Iran to reopen the key oil route. The US has also issued a warning to Iran, stating that any Iranian vessels approaching the Strait of Hormuz would face immediate elimination.
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The Strait of Hormuz is a critical waterway that accounts for nearly 20% of global crude oil shipments. The US is attempting to take control of the Strait from Iran, which has been fully occupied by Iran since the war began on February 28. By enforcing the blockade, the US is looking to cut off a significant source of revenue for Iran, but it could also risk pushing oil and gas prices even higher.
Crude oil prices have surged over 40% since the beginning of March amid fears of supply disruptions, which analysts expect will persist in the near term as tensions show no signs of cooling. Continued control over the Strait of Hormuz is also one of Iran's key conditions for forging a permanent peace deal.
| Airline | Share Price Change |
|---|---|
| Delta Air Lines | -3.2% |
| American Airlines Group | -2.6% |
| United Airlines Holdings | -2.8% |
| Southwest Airlines | -2.9% |
| Alaska Air Group | -3.1% |
| JetBlue Airways | -2.7% |
| SkyWest | -3.0% |
Note: The table shows the share price changes of major airlines on Monday.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Investor Takeaway
US airline stocks are likely to remain under pressure due to the surge in crude oil prices.
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