Middle East Flight Resumption: How the Rebound in Airline Stocks Could Impact Your Business Investments
HONG KONG: Airline shares experienced a rebound on Thursday as flights from the Middle East resumed, providing some relief to carriers after U.S. and Israeli strikes on Iran earlier in the week caused significant losses in market value.
Governments have been racing to arrange flights for tens of thousands of citizens stranded due to the escalating conflict in the region, which has resulted in the closure of most airspace over fears of missile strikes on aircraft.
Cathay Pacific Airways in Hong Kong saw its shares rise by 2.2%, while Qantas Airways and Korean Air Lines increased by 1% and 5.6%, respectively. Meanwhile, Japan Airlines saw a decrease of 1%, slightly reducing its losses for the week.
Major Chinese airlines, including Air China, China Eastern Airlines, and China Southern Airlines, experienced declines ranging from 1% to 4% in both Hong Kong and Shanghai as they began to stabilize.
“Asian airlines are particularly sensitive to the situation in Iran due to their reliance on routes in the region and energy costs,” explained Gary Ng, a senior economist at Natixis. “Any indication of a resolution could significantly affect market sentiment.”
Following the closure of Dubai International Airport—the world’s busiest airport, typically handling over 1,000 flights daily—ticket prices on popular routes, such as from Australia to Europe, surged. Emirates and Etihad Airways are now operating a limited number of flights from Dubai and Abu Dhabi through designated safe air corridors.
Qatar Airways announced it would initiate limited relief flights from Muscat, Oman, starting Thursday. These flights will connect stranded passengers to six European destinations, including London, Berlin, and Rome, as well as from Riyadh to Frankfurt. This marks the airline’s first flights since Saturday, when services from its Doha hub were suspended due to the conflict, according to flight-tracking service Flightradar24.
By Thursday morning, Emirates had resumed flights from Dubai to various destinations, including Sydney, Hong Kong, Paris, Amsterdam, Toronto, and Mumbai, although many of its routes remain canceled. Flightradar24 reported that Dubai airport handled 161 take-offs and landings on Wednesday, nearly doubling the number from the previous day.
The U.S. government is arranging charter flights to bring Americans back from the Middle East, with additional flights planned from other regional locations, as stated by the U.S. State Department. Since February 28, over 17,500 Americans have returned to the U.S. from the Middle East.
Canada is also working to repatriate its stranded citizens through commercial and charter flights. The escalating conflict in the Middle East has disrupted travel and reduced global air cargo capacity by more than 20%, leading to increased freight rates.
Jet fuel prices have surged globally following the strikes in Iran, reaching a record high in Singapore due to concerns over supply disruptions, according to S&P Global Platts.
Despite recent rebounds in airline stocks from significant double-digit drops, analysts caution that the sustainability of this rebound remains uncertain and hinges on the ongoing conflict in Iran. “For now, I see this rebound as primarily short-term, and its sustainability will depend on developments in the Iranian situation,” noted Kenny Ng, a securities strategist at China Everbright Securities International.
In a potentially positive development, operatives from Iran’s Ministry of Intelligence reportedly expressed willingness to engage in talks with the U.S. Central Intelligence Agency (CIA) about ending the conflict, as reported by the New York Times.
The airspace restrictions have forced airlines to reroute, carry extra fuel, or make additional stops to ensure safety and avoid unexpected diversions. Marooned tourists and expatriates are also seeking alternative exits from the Middle East through Saudi Arabia or Oman, where airspace remains open.
Special Analysis by Omanet | Navigate Oman’s Market
The recent rebound of airline shares signifies a potential resurgence in travel demand post-conflict, which may create opportunities for Oman’s tourism and hospitality sectors. However, the volatile situation in the Middle East presents risks, particularly in fuel prices and cargo logistics, that could affect operational costs for local businesses. Smart investors should consider focusing on diverse routes and robust supply chains to capitalize on shifts in air transport patterns while remaining agile to geopolitical developments.
