Shares of major airlines and cruise operators fell sharply on Monday as surging oil prices triggered a selloff in travel-related stocks.
United Airlines (NASDAQ:UAL) dropped 6%, while American Airlines (NASDAQ:AAL) fell 5%. Delta Air Lines (NYSE:DAL) declined 4.5% and Southwest Airlines (NYSE:LUV) slipped 3.8%, as investors reacted to the sharp rise in crude prices.
Oil jumped roughly 20% in early Monday trading, reaching its highest levels since July 2022. The surge followed an escalation in the U.S.-Israeli conflict with Iran, which has prompted some Middle Eastern producers to curb supply and raised concerns about potential disruptions to tanker traffic through the Strait of Hormuz.
Cruise operators also came under pressure. Carnival (NYSE:CCL) fell 7%, Royal Caribbean (NYSE:RCL) dropped 6.6%, and Norwegian Cruise Line (NYSE:NCLH) declined 6%.
Deutsche Bank warned on Friday that the spike in oil prices could pose a serious threat to the airline industry. The firm noted that the sector suffered significant financial damage during the 2005 fuel price surge, when Delta Air Lines and Northwest Airlines were forced to file for bankruptcy.
“Absent near-term relief, airlines around the world could be forced to ground” thousands of aircraft as a result of the Iran war, analyst Michael Linenberg wrote in a note. “Some of the industry’s financially weakest carriers could halt operations.”
Although U.S. airlines are largely shielded from the direct travel disruptions affecting the Middle East, jet fuel accounts for as much as 30% of their operating costs, leaving them highly sensitive to fluctuations in oil prices.
Analysts say that if the conflict persists, elevated oil prices could continue to weigh on airline profitability and the broader travel sector.
Southwest Airlines stock price