Airline Stocks Plummet as Middle East Conflict Disrupts Travel and Oil Prices Soar

The recent launch of large-scale strikes on Iran by the US and Israel has sent shockwaves through the global airline industry. On March 2, airline shares across Asia experienced a sharp decline, with carriers such as Cathay Pacific, Singapore Airlines (SIA), Japan Airlines, and Qantas Airways reporting drops of more than 5%.

Amidst the ongoing war in Iran, key Middle Eastern hubs, including Dubai and Doha, have been forced to close for a third day. This has left tens of thousands of passengers stranded and disrupted thousands of flights worldwide.

As a result, oil prices have surged by more than 7%, reaching their highest point in months. These attacks have caused damage to tankers and disrupted shipments from the region, leading to concerns over supply and driving up prices.

The impact of these events has been felt by airlines across Asia, with shares in carriers such as ANA Holdings, Air China, China Southern Airlines, China Eastern Airlines, Malaysia’s AirAsia X, and Taiwan’s China Airlines and EVA Airways all falling by at least 4%.

Analyst Nicole Lim from Morningstar has attributed this sharp decline to market concerns over higher fuel costs, flight cancellations, and additional expenses from rerouting flights due to airspace and airport closures. However, she notes that many Asian airlines have partially hedged their fuel costs, which may help mitigate some of the impact.

While some carriers may experience losses, others could benefit from the increased demand for flights as travelers seek alternative routes. Cathay Pacific, for example, has cancelled all of its flights to the Middle East, including services to Dubai and Riyadh. However, they are waiving rebooking and rerouting fees for affected customers.

SIA has also been forced to cancel flights to and from Dubai until March 7, while Japan Airlines has suspended its Tokyo-Doha flights temporarily. Independent aviation analyst Brendan Sobie has noted that East Asian carriers may not be as heavily affected, as they have limited flights to the affected airports. However, they may still feel the impact of higher oil prices and global economic instability.

Indian carriers, on the other hand, are facing significant challenges due to their heavy flying schedules to the Middle East, which mainly cater to migrant workers. In addition, a ban on using Pakistan’s airspace has affected flights to and from Europe. This has led to numerous flight cancellations for Air India, with some flights being rerouted through Rome for refueling.

According to data provider VariFlight, airlines in mainland China have already cancelled 26. 5% of flights to and from the Middle East between March 2 and March 8. However, the overall impact on flight schedules for the week is still uncertain, as carriers are monitoring the situation closely before making further adjustments.

The ripple effects of the Middle Eastern conflict have been felt globally, with airports like Dubai and Doha experiencing high traffic on a regular basis