Travel shares tumbled on Monday as escalating conflict between the U.S., Israel and Iran disrupted flights worldwide, forced the closure of key Middle Eastern hubs and sent oil prices surging, with analysts warning of weeks of disruption.
Dubai, the world’s busiest international hub, and Doha remained shut for a third day, leaving tens of thousands of passengers stranded as aviation faced its biggest challenge since the COVID pandemic. Jordan on Monday became the latest country in the region to partially close its airspace.
Oil prices jumped 7% to their highest in months as Iran and Israel stepped up attacks, raising the prospect of higher fuel costs for airlines.
Shares in TUI, Europe’s largest travel company, were down 8.5% at 1039 GMT, while Lufthansa was down 6.5% and British Airways-owner IAG down 4.8%. Hotelier Accor and cruise company Carnival also fell sharply. U.S. airline shares dropped around 5% in pre-market trade.
“We believe that an active war zone, along with the resulting flight disruptions (due to closure of airspace and airports), is likely to curb travel appetite in the region,” said B Riley Securities in a note.
Analysts highlighted rising fuel costs, cancellations and rerouting expenses as the main pressure points for airlines, despite hedging. J.P. Morgan, Goodbody and Citi pointed to Wizz Air as the most exposed European carrier because of its large presence in Israel.
Aircraft and crew were scattered around the world in the wrong places in what Paul Charles, head of travel consultancy PC Agency, said was a “nightmare scenario”, with airlines not knowing when swaths of Middle Eastern airspace would reopen.
Middle Eastern carriers continued to cancel flights on Monday. Flydubai suspended all flights to and from Dubai until 3 p.m. (1100 GMT) on Tuesday.
Asian airline stocks were also hit. Japan’s ANA Holdings , Air China , China Southern Airlines, China Eastern Airlines, Malaysia’s AirAsia X and Taiwan’s China Airlines and EVA Airways all fell at least 4%. Cathay Pacific cancelled all flights to the Middle East, including to Dubai and Riyadh, and waived rebooking fees.
Singapore Airlines cancelled flights to and from Dubai through March 7, while Japan Airlines suspended Tokyo-Doha services.