Rising crude prices and the widening U.S.-Israeli war with Iran battered Asian airline shares and stretched carrier operations on Monday, as travellers pursued often costly routes out of the Middle East and many flights were cancelled amid continuing airspace closures.
Oil shot up roughly 20% in early trading on Monday to its strongest level since July 2022, a move market participants attributed to concerns over tighter supplies and prolonged interruptions to shipments tied to the conflict. That jump in crude has direct consequences for airlines: jet fuel costs are rising even faster in some cases because deliveries have become scarcer in affected corridors.
Market reaction was swift. Major carriers across the region saw sharp declines in their share prices on Monday, with listed names including Qantas Airways, Air New Zealand, Cathay Pacific, Japan Airlines, Korean Air Lines, China Southern and China Eastern all falling between about 4% and more than 10%.
Fuel is a major line item for airlines, second only to labour, and typically makes up roughly a fifth to a quarter of operating expenses. Some Asian and European carriers have hedging programs that can blunt some of the impact from sudden spikes in crude through derivative contracts. U.S. carriers, by contrast, largely curtailed hedging over the last two decades and therefore can be more exposed when prices jump.
Subhas Menon, head of the Association of Asia Pacific Airlines, noted that crude rising around 20% translates into even larger relative increases for jet fuel when supplies are constrained, adding substantial operational cost pressure. He also pointed to stretched crew resources driven by longer flying times when routes must detour around closed airspace.
Brendan Sobie, a Singapore-based independent aviation analyst, said airlines were already operating in a difficult environment because of political and economic uncertainty and supply-chain problems. He added that the recent conflict and oil-price move had raised that already high level of uncertainty further.
Travel disruption and evacuations
Since the conflict between the U.S.-Israeli coalition and Iran began on February 28, through March 8 more than 37,000 flights to and from the Middle East were cancelled, according to Cirium data. The cancellations reflect widespread airspace closures and temporary airport shutdowns that have forced passengers to seek alternative, often costly, ways to leave affected areas.
Stranded travellers have in some cases paid large sums for last-minute road or air travel out of the region, taken overland journeys to less-affected hubs, or chartered private jets when limited commercial services could not meet demand. Military aircraft have at times escorted passenger planes out of the region as the safety environment deteriorated.
Several governments and airports have adjusted operations to prioritise essential movements. Australia asked family members and dependants of diplomatic staff in the United Arab Emirates to depart, following an escalation that included Iranian bombardment of several Gulf cities and a brief closure of Dubai International Airport on Saturday. Oman’s Muscat International Airport issued guidance asking private jet operators to avoid using the airport for "additional flights," prioritising government and commercial services, according to an email seen by Reuters.
Turkish Transport Minister Abdulkadir Uraloglu said flights by Turkish Airlines, AJet, Pegasus and SunExpress to Iraq, Syria, Lebanon and Jordan had been cancelled until March 13. The United States has completed more than a dozen charter flights and evacuated thousands of Americans from the region since last week, the U.S. State Department said over the weekend.
Responding to surging demand for non-stop options as Middle Eastern airspace closures disrupt connections, Air India added dozens of flights to destinations in Europe and North America through March 18.
Operational and human costs
Beyond the immediate financial hit, pilots told Reuters that the accumulation of conflicts - spanning Ukraine, Afghanistan and Israel - has heightened stress on their mental health, as shrinking usable airspace and a proliferation of military drones require additional vigilance and operational adjustments.
The combination of sharply higher fuel costs, longer routings, stretched crews and constrained airport capacity has produced a complex operating environment in which airlines must manage safety, costs and customer flow while dealing with rapidly changing circumstances.
Derivatives-based hedging can shield airlines from fuel-price spikes but also can lock carriers into above-market rates if prices later fall, a risk that has caused problems for some operators historically. Market participants point out that hedging is a double-edged tool: protective in a rising market, potentially costly in a declining one.
As the conflict continues to affect air routes and fuel markets, carriers, regulators and governments face persistent challenges in restoring stable, safe and affordable travel across the region.