Middle east conflict shakes markets: Airline stocks fall while oil and defense shares surge

Shares of airlines, cruise companies, and hotels fell on Monday as investors reacted to the Middle East conflict. Energy and defense stocks rose sharply. American Airlines Group Inc. stock dropped up to 7.4% when trading opened in New York.

Cruise company Carnival shares went down by about 12%. Oil company Exxon Mobil shares went up by 4.7% and reached a record high, according to Bloomberg. Defense companies like Lockheed Martin and RTX also saw their shares go up.

Oil and inflation worries

Traders were worried that the fighting could disturb oil supply. They also feared that this could make prices rise (inflation). Brent oil prices jumped by about 13% before slowing down. Experts said the situation is very uncertain and could affect oil supply, shipping, tourism, and flights. The S&P 500 stock index fell by about 1.2%, similar to markets in Asia and Europe.

Energy companies rise

Energy company shares around the world increased. Companies like Exxon, Chevron, and Occidental Petroleum all gained. Experts said the main worry is how Iran’s reaction may affect global oil supply. He said oil price spikes may be temporary unless supply is seriously disrupted.

If the Strait of Hormuz stays closed long, oil could go above $100 per barrel. Iran said it does not plan to shut the waterway, but tanker traffic has almost stopped. Tanker firm Nordic American Tankers Ltd. shares jumped about 11%, as noted by Bloomberg.

Materials sector impact

Fertilizer company CF Industries Holdings Inc. stock rose 8.3% because Iran exports large amounts of urea. Trader Andrew Hart said higher fertilizer prices could hurt big agriculture firms’ profits. Shares of Archer-Daniels-Midland Co. and Bunge Global SA fell.

Defense stocks surge

Defense stocks have already been rising due to global tensions. Companies like Northrop Grumman Corp. and drone maker AeroVironment Inc. gained strongly. Truist analyst Michael Ciarmoli said the strikes against Iran will likely keep defense stocks strong. He added this could support Donald Trump’s plan to increase US defense spending to $1.5 trillion by 2027. Analyst Sheila Kahyaoglu said Middle East countries may increase military spending, benefiting US contractors.

Travel & airlines hit

Higher oil prices increase airline and cruise fuel costs. Conflict risks disrupting travel demand and operations worldwide. Airlines across the Persian Gulf faced operational chaos due to airspace disruptions.

Stocks of Delta Air Lines Inc. and United Airlines Holdings Inc. also fell. Airlines in Europe and Asia, including Japan Airlines and Singapore Airlines, also declined, as cited by Bloomberg. Cruise companies like Royal Caribbean and Norwegian Cruise Line dropped along with Carnival. Strategist Francis Tan said airline stocks are immediately affected due to airspace closures and possible flight cancellations.

Hotels & shipping effects

Hotel firms could suffer due to travel disruptions and weaker demand. InterContinental Hotels Group Plc shares fell as much as 6.2%. French hotel group Accor SA plunged 11%. Freight firms like FedEx Corp., United Parcel Service Inc., and DHL could face higher costs due to longer routes. Container shipping firm AP Moller‑Maersk A/S shares rose up to 7.7% because transport delays allow higher fees.

Luxury stocks also fall

Luxury brands usually suffer when travel and consumer confidence fall. RBC analyst Piral Dadhania said luxury demand needs a “feel-good” environment. A UBS basket of European luxury stocks dropped 4.5% on Monday. Swiss luxury firms Richemont and Swatch Group AG led declines. Investors are shifting money into oil and defense stocks while selling travel, luxury, and airline shares due to fears of prolonged conflict and supply disruptions.

FAQs

Q1. Why did airline and travel stocks fall recently?

Airline and travel stocks fell because the Middle East conflict may increase fuel costs and disrupt flights and tourism demand.

Q2. Why did oil and defense stocks rise?

Oil and defense stocks rose because investors expect higher energy prices and more military spending during conflicts.