Airline Stocks Tumble as Iran War Expands Across the Middle East

Airline stocks fell on Monday as the escalating conflict in the Middle East sent oil prices surging and forced governments to shut down airports.

The sell-off followed weekend strikes on Iran by the United States and Israel and retaliation by Iran on targets across the region. President Trump said he expected the attacks could last four to five weeks, but “we have the capability to go far longer than that.” Global shipments of oil and goods through the key Middle Eastern corridor, the Strait of Hormuz, have slowed to a trickle since the attacks began on Saturday. Oil prices jumped as much as 13 percent on Monday morning before moderating.

At least 11,000 flights to and from Middle Eastern countries have been canceled, affecting more than one million travelers, according to Cirium, an aviation data firm. More than 660,000 passengers fly to and from the Middle East on a typical day.

Flights into the United Arab Emirates were particularly disrupted. Dubai International Airport was damaged over the weekend, and all flights were suspended on Saturday, though the airport said in a statement that a limited number were expected to restart on Monday.

The European Union Aviation Safety Agency warned airlines on Saturday against flying over the Middle East, citing “a high risk to civil aviation,” later extending that warning to Friday.

The region is an important transit hub for passenger and cargo traffic between Europe and Asia, especially because Russia has restricted use of its airspace since the war in Ukraine began in 2022, Eddy Pieniazek, the head of Ishka Advisory, an aviation consulting firm, said in a statement.

But while the impact of the new conflict has fallen heavily on carriers in the Middle East such as Emirates, Etihad Airways, flydubai and Qatar Airways, a sustained spike in oil prices would drive up the price of jet fuel, hurting profits for airlines around the world. Fuel typically accounts for 15 to 25 percent of a flight’s costs. In addition, the conflict is likely to force travelers to cancel or put off trips.

Analysts at Citi said in a note that they expected Brent crude, the global benchmark for oil, to trade between $80 and $90 a barrel this week as the conflict continues.

If oil prices rise further, however, or if the Strait of Hormuz is forced to close, U.S. inflation “could start to become meaningful and sustained,” said Eric Parnell, chief market strategist at Great Valley Advisory Group, a financial research firm.

“This would likely undermine expectations for further Fed rate cuts and pressure both stock and bond markets,” Mr. Parnell added.

The share prices of American Airlines, United Airlines and Delta Air Lines fell more than 6 percent Monday morning before recovering somewhat. United and American suspended regional service, and Delta extended cancellations to Tel Aviv through March 31.

The drop in the three U.S. airlines’ stock is largely because of the possibility of higher energy costs, said Brian Mulberry, chief market strategist at Zacks Investment Management. The spike in oil prices and the pressure on the Strait of Hormuz could affect the companies’ earnings by 15 to 20 percent, Mr. Mulberry added.

How long tension in the Persian Gulf lasts and how much shipping and refining will be impacted is “the important part for markets,” Mr. Mulberry said.

Over the past two decades, the Middle East’s share of global flights has more than doubled, to about 5.5 percent, according to Cirium. The region is one of the fastest-growing in the world, and its airlines enjoy the highest profit margins in the industry, according to the International Air Transport Association, a trade group.

Even as flights in the region restart, it may take time for airlines to get stranded passengers, planes and crews back to where they need to be. If the disruption lingers, it could raise costs for airlines flying in the region and, eventually, result in higher fares.

“There are a lot of ripple effects, the degree of which remain to be seen,” said Bryan Terry, a managing director at Alton Aviation Consultancy. Insurance costs could rise, for example. And, if airlines have to avoid the airspace over the Middle East for long, some flights could become more expensive to operate and take longer to complete.

Airlines in the Middle East have established a lucrative business linking the United States and Europe with Africa and Asia through flights that connect in the region. Last year, an average of about 138,000 passengers connected daily through Doha, Dubai and Abu Dhabi, according to Cirium.

Stocks of Asian and European airlines and travel agencies, hotels and cruise operators also fell.

But Mr. Terry and other analysts said there was hope that air travel disruptions could be limited.

“One thing that we’ve historically seen is, the industry is tremendously resilient,” he said. “It absorbs shocks to the systems on a regular basis. They come from different places in different forms, but the recoveries are typically very consistent, and usually the industry survives and thrives longer term.”

Christine Chung contributed reporting.