The aviation sector faced major turbulence on Monday as airline stocks plummeted and airfares surged, driven by a sharp rise in oil prices amid the escalating US-Israeli conflict with Iran.
Crude oil prices soared by 15 per cent, surpassing $105 a barrel – a level not witnessed since 2022.
The dramatic increase was fuelled by supply cuts from major producers and growing concerns over prolonged shipping disruptions, with Brent crude futures briefly jumping by as much as 29 per cent.
The ripple effect has seen some jet fuel prices double since the conflict began, intensifying pressure on carriers already contending with restricted airspace as pilots reroute to bypass the volatile Middle East.
Thousands of passengers are also stranded, adding to operational strain.
Deutsche analysts issued a stark warning, saying: “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.”
In Asia, airline shares tumbled, with the worst-hit including Korean Air Lines, which slid 8.6 per cent, Air New Zealand, which fell 7.8 per cent, and Hong Kong’s Cathay Pacific which dropped 5 per cent.
In Europe, Air France, British Airways owner IAG, Wizz Air, and Lufthansa fell between 2.5 per cent and 6 per cent in morning trade, while major US airlines were down about 4 per cent in pre-market trading.
Underscoring that pain on the consumer side were jumps in ticket prices. Direct flights from Seoul to London on 11 March with Korean Air Lines, for example, leapt to US$4,359 (£3,264), from $564 (£422) seven days earlier, according to Google Flights data.
“The issue for the airlines now is that travel demand may be curtailed as costs become prohibitive for leisure travellers 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.”
Fuel is the second-largest expense for air carriers after labour, typically accounting for a fifth to a quarter of operating expenses. Some major Asian and European airlines have oil hedging in place, but US airlines largely stopped the practice over the last two decades.
Conflict adds ‘significant cost’
High prices could have severe implications for the industry.
“If crude is rising 20 per cent, 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 28 February, when the US-Israeli war on Iran started, through 8 March, more than 37,000 flights to and from the Middle East have been cancelled, according to data from Cirium.
With airspace severely constrained, airlines have been forced to reroute flights, carry extra fuel or make additional refuelling 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 passengers from Europe to Asia and more than half of all passengers from Europe to Australia, New Zealand and the nearby Pacific Islands, according to Cirium.
In Oman, Muscat International Airport has asked private jet operators to avoid using the site for “additional flights,” giving priority to government and commercial flights as fresh airspace closures hit the region’s attempts to increase travel.
Flights to Iraq, Syria, Lebanon and Jordan by Turkish Airlines, AJet, Pegasus, and SunExpress have been cancelled until 13 March, Turkish Transport Minister Abdulkadir Uraloglu said on Sunday.
