Airline shares battered, airfares surge as Iran war pushes oil above US$100

Air Canada Boeing 737 MAX 8 aircraft sit parked at Vancouver International Airport, in Richmond, B.C., on Monday, Aug. 18, 2025. THE CANADIAN PRESS/Darryl Dyck

HONG KONG/FRANKFURT -- Airline stocks were hammered on Monday, while airfares soared as the U.S.-Israeli war on Iran sent oil prices surging, sparking fears of a deep travel slump and the potential for the widespread grounding of planes.

Oil prices jumped 15 per cent to above US$105 a barrel, hitting levels not seen since 2022 as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market. At one point, Brent crude futures jumped as much as 29 per cent.

Some jet fuel prices have doubled since the start of the conflict, piling pressure on carriers already navigating tight airspace as pilots reroute to avoid the Middle East conflict and thousands of stranded passengers try to leave the region.

“Absent near-term relief, airlines around the world could be forced to ground thousands of aircraft while some of the industry’s financially weakest carriers could halt operations,” Deutsche analysts said in a note to clients.

Fewer leisure travellers?

In Asia, airline shares tumbled, with the worst-hit, including Korean Air Lines 003490.KS, which slid 8.6%, Air New Zealand AIR.NZ down 7.8% and Hong Kong’s Cathay Pacific 0293.HK which dropped 5%.

In Europe, Air France KLM AIRF.PA, British Airways-owner IAG ICAG.L, Wizz Air WIZZ.L and Lufthansa LHAG.DE fell between 2.5% and 6% in morning trade.

Major U.S. airlines shares were down about 1% to 5% in afternoon trading with JetBlue Airways JBLU.O down 5.35% followed by American Airlines AAL.O down 3.44%.

Underscoring that pain on the consumer side were jumps in ticket prices. Direct flights from Seoul to London on March 11 with Korean Air Lines, for example, leapt to $4,359, from $564 seven days earlier, according to Google Flights data. Flights from Los Angeles to Lima on LATAM Airlines LTM.SN rose to $2,125 compared to $499 in the same period.

“The issue for the airlines now is that travel demand may be curtailed as costs become prohibitive for leisure travelers and as some companies start to limit business travel due to the uncertain outlook,” said Lorraine Tan, director of equity research, Asia at Morningstar.

The impact of high airfares could limit travel demand for much of 2026, Tan added.

Fuel is the second-largest expense for air carriers after labor, typically accounting for a fifth to a quarter of operating expenses. Some major Asian and European airlines have oil hedging in place, but U.S. airlines largely stopped the practice over the last two decades.

“We assume the airlines are able to recapture a portion of the spike in fuel prices, but it’s hard to envision margin expansion this year barring a rapid decline in energy prices,” said Tom Fitzgerald, TD Cowen vice president of equity research on six major U.S. airlines and Air Canada.

A one-way trip to Quebec City from Newark on March 11 aboard Air Canada nearly tripled to $1,499 compared to a week ago, according to data from Google Flights.

‘Significant cost’ for airlines

High prices could have severe implications for the industry.

“If crude is rising 20%, jet fuel is rising several times more as it is even more scarce, adding significant cost to operations together with crew resources, which are stretched due to longer flying times when airspace is closed,” said Subhas Menon, head of the Association of Asia Pacific Airlines.

The Deutsche analysts noted that a sharp spike in jet fuel costs in 2005 in the aftermath of hurricanes Katrina and Rita resulted in widespread and significant damage to the industry, including major airlines Delta and Northwest filing for Chapter 11 bankruptcy that year.

Since February 28, when the U.S.-Israeli war on Iran started, through March 9, more than 40,000 flights to and from the Middle East have been canceled, according to data from Cirium.

With airspace severely constrained, airlines have been forced to reroute flights, carry extra fuel or make additional refueling stops to guard against sudden diversions or longer flight paths through safer corridors.

Combined, Emirates, Qatar Airways and Etihad normally fly about one-third of the passengers from Europe to Asia and more than half of all passengers from Europe to Australia, New Zealand and nearby Pacific Islands, according to Cirium.

Flights to Iraq, Syria, Lebanon and Jordan by Turkish Airlines THYAO.IS, AJet, Pegasus PGSUS.IS and SunExpress have been canceled until March 13, Turkish Transport Minister Abdulkadir Uraloglu said on Sunday.

(Reporting by Julie Zhu in Hong Kong, Christoph Steitz in Frankfurt and Doyinsola Oladipo in New York; Additional reporting by Heekyong Yang and Hyun Joo Jin in Seoul and Xinghui Kok in Singapore; Writing by Anne Marie Roantree and Adam Jourdan; Editing by Jamie Freed, Edwina Gibbs, Susan Fenton and Aurora Ellis)