US-Iran Tensions Weigh on Tourism-Related Stocks

Key Takeaways

• Rising crude oil prices due to escalating US-Iran tensions are expected to impact tourism-related stocks, particularly airlines and hotels.
• Higher fuel costs and security concerns may lead to softer bookings, reduced consumer spending, and decreased travel demand.
• Brent crude prices have surged from $71.7 per barrel on February 26 to $79.7 per barrel as of March 3.

Airlines Vulnerable to Higher Fuel Costs

Read also: SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire

• Airline stocks are likely to face significant pressure due to the double whammy of rising crude oil prices and weaker travel demand.
• Higher fuel costs will directly hurt margins, while geopolitical uncertainty may lead to flight cancellations, reduced passenger traffic, and lower seat occupancy.

Impact on Airlines and Hotels

• Interglobe Aviation (operator of IndiGo), derived 30% of its expenses from aviation fuel in the December quarter.
• SpiceJet also derived 30% of its expenses from aviation fuel in Q3FY26.
• Aviation fuel costs rose 8.1% year-on-year to ₹6,944 crore for Interglobe Aviation in the December quarter.
• Ebitda margin fell from 27.4% in Q3FY25 to 25.6% in Q3FY26 for Interglobe Aviation.

Hotel Stocks Face Short-Term Pressure

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

• Hotel stocks could face near-term pressure if geopolitical tensions lead to higher airfares and a slowdown in international travel.
• Indian Hotels Co. Ltd (IHCL) derived 22% of its consolidated operating revenues in Q3FY26 from international business.
• IHCL and ITC Hotels fell 2.4% and 2.04%, respectively, in Monday's trading session.