Airline stocks moved sharply higher on Wednesday, with leading U.S. carriers posting gains of between 5% and 7.6% amid growing expectations that the United States and Iran could soon reach a diplomatic agreement.
United Airlines (NASDAQ:UAL) led the sector higher with a 7.6% rally. Shares of American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), and Southwest Airlines (NYSE:LUV) each gained around 7%, while JetBlue Airways advanced 5%.
The gains followed a Reuters report stating that Washington and Tehran are approaching a preliminary one-page agreement to end the conflict, citing a Pakistani source familiar with the negotiations.
Separately, Axios reported that the proposed memorandum would formally end hostilities and launch a 30-day negotiation period aimed at reaching a broader detailed agreement.
According to Axios, the framework would center on reopening the Strait of Hormuz, limiting Iran’s nuclear activities, and easing U.S. sanctions.
The developments also weighed on energy markets, sending oil prices to their lowest levels in roughly two weeks. Brent crude futures dropped 8% as concerns about potential supply disruptions in the Middle East eased.
The Strait of Hormuz remains one of the world’s most important oil shipping routes, and geopolitical tensions in the region have historically pushed up fuel costs for airlines.
A diplomatic breakthrough between the U.S. and Iran could help reduce geopolitical uncertainty and potentially ease operating costs across the airline industry.