Airline stocks tumbled across global markets on Monday while airfares surged sharply as escalating hostilities involving the United States, Israel and Iran triggered a spike in oil prices and heightened uncertainty across the aviation sector.
The intensifying conflict has disrupted energy markets, pushing crude prices to levels not seen in years and raising concerns about a prolonged shock to global travel demand. Industry analysts warn that the surge in fuel costs, combined with restricted airspace across parts of the Middle East, could significantly strain airline operations and potentially force carriers to ground aircraft if the crisis persists.
Oil markets reacted strongly to the geopolitical tensions. Benchmark Brent Crude surged dramatically on Monday, climbing as much as 29 percent at one point before easing slightly, while still remaining more than 15 percent higher overall. The spike pushed prices to levels last recorded in 2022, reflecting fears that supply disruptions and shipping risks could continue for an extended period.
The surge in energy prices quickly rippled through airline stocks, with carriers in Asia among the hardest hit by investor concerns over rising operational costs and weaker travel demand.
Shares of Korean Air Lines dropped 8.6 percent, while Air New Zealand fell 7.8 percent. Hong Kong-based Cathay Pacific also declined by around 5 percent as investors reacted to the deteriorating outlook for the aviation industry.
European airlines were also affected. Early trading saw shares of Air France–KLM, International Airlines Group — the parent company of British Airways — and Lufthansa fall between 4 and 6 percent. Major U.S. carriers were also under pressure, dropping roughly 4 percent in pre-market trading.
While airline stocks fell, passengers faced sharply higher ticket prices as airlines grappled with rising costs and operational disruptions.
Data from Google Flights showed that the price of a direct flight from Seoul to London scheduled for March 11 on Korean Air surged to about $4,359, compared with just $564 a week earlier — a more than sevenfold increase.
Analysts say such dramatic price increases could discourage leisure travel and prompt companies to cut back on business trips due to mounting costs and uncertainty.
Lorraine Tan, director of equity research for Asia at Morningstar, said the sharp rise in fares may significantly weaken travel demand over the coming months.
According to Tan, higher ticket prices are likely to make travel unaffordable for many leisure travellers, while businesses may also scale back corporate travel amid economic uncertainty caused by the conflict.
Fuel costs already represent one of the largest expenses for airlines, second only to labour, and typically account for between 20 and 25 percent of operating costs. The sudden jump in oil prices therefore places immediate financial pressure on carriers.
Although some Asian and European airlines use fuel hedging strategies to cushion the impact of rising oil prices, many U.S. airlines largely abandoned such practices over the past two decades, leaving them more exposed to volatile energy markets.
Industry experts warn that the situation could worsen if jet fuel supplies tighten further.
Subhas Menon, head of the Association of Asia Pacific Airlines, explained that when crude oil prices surge, jet fuel prices often rise even more steeply due to limited supply. He added that airlines are also facing additional operational costs because flights are taking longer routes to avoid restricted airspace.
With parts of the Middle East effectively closed to commercial aviation, airlines are being forced to reroute flights through longer and less efficient corridors. These changes require additional fuel and sometimes extra refuelling stops, further increasing costs and stretching airline resources.
Flight disruptions have already become widespread since the conflict began.
Data from aviation analytics company Cirium shows that more than 37,000 flights to and from the Middle East were cancelled between February 28 — when the war escalated — and March 8.
Analysts at Deutsche Bank warned that if oil prices remain elevated and airspace restrictions continue, airlines worldwide may be forced to ground thousands of aircraft. They also cautioned that financially weaker carriers could struggle to survive a prolonged crisis.
The bank noted that a similar surge in jet fuel prices in 2005, following hurricanes Katrina and Rita, caused severe financial distress across the airline industry, forcing major carriers such as Delta Air Lines and Northwest Airlines to file for bankruptcy protection that year.
With fuel prices climbing, flight routes disrupted and passenger demand at risk of weakening, the aviation sector now faces one of its most serious challenges in recent years as the geopolitical crisis continues to unfold.
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