Defense to Airlines: How Stocks Are Reacting to Iran Attacks
(Bloomberg) — Shares of airlines, cruise operators and hotels fell on Monday as investors reacted to the conflict in the Middle East. Energy and defense stocks jumped.
American Airlines Group Inc. dropped as much as 7.4% as trading opened in New York, while Carnival Corp. plunged nearly 12%. Meanwhile, Exxon Mobil Corp. jumped 4.7% to an intraday record, and defense contractors such as Lockheed Martin Corp. and RTX Corp. advanced.
Traders grappled with the risk that the fighting would disrupt energy supplies and stoke inflation. Brent crude oil surged as much as 13% before paring gains.
“The situation remains highly fluid, and it is uncertain how long this conflict will last, with potential risks to energy supplies, sea freight in the straight of Hormuz, air travel and tourism,” Barclays Plc strategist Emmanuel Cau wrote.
The S&P 500 Index fell as much as 1.2%, mirroring declines in Asia and Europe.
Here’s a breakdown of the sectors in focus:
Energy and Materials
Major energy companies saw strong gains across the globe. Exxon, Chevron Corp. and Occidental Petroleum Corp. climbed as the US energy sector extended Friday’s rally to an all-time high. Norway’s Equinor, Spain’s Repsol, Australia’s Woodside Energy Group Ltd. and Hong Kong-listed PetroChina also gained.
“It’s just a matter of what impact will Iran’s response have on the global oil supply — at least temporarily, and then maybe longer term,” said Rob Thummel, a portfolio manager at Tortoise Capital. Any spike in prices could prove short-lived if supplies aren’t severely disrupted, he said. In a less likely scenario, a prolonged closing of the Strait of Hormuz could push prices above $100 per barrel, he added.
Iran has said it doesn’t intend to shut the waterway, which accounts for some 20% of global oil flows, but tanker traffic there has all but halted.
Oil tankers are are also poised to benefit, Thummel said. Shares of Nordic American Tankers Ltd. rose as much as 11% on Monday.
In the materials sector, CF Industries Holdings Inc. soared 8.3%. Iran is a major exporter of urea, and CF would benefit from higher prices, according to Clear Street equity sales trader Andrew Hart.
“On the flip side, higher fertilizer prices can crush margins at large-scale agri businesses,” Hart wrote, citing Archer-Daniels-Midland Co. and Bunge Global SA as examples. Shares of both dipped.
Defense
Defense stocks have rallied over the past year as global tensions intensified, and the latest Middle East conflict is giving investors another reason to pile in.
Key US contractors such as Lockheed Martin and Northrop Grumman Corp. rallied, while drone manufacturer AeroVironment Inc. jumped as much as 18% and Kratos Defense & Security Solutions Inc. climbed 9.6%.
“This weekend’s strikes against Iran will likely continue to keep a bid under the defense sector,” Truist analyst Michael Ciarmoli wrote. Continued strikes may reinforce President Donald Trump’s desire to boost US defense outlays to $1.5 trillion for 2027, especially if the operation goes on for weeks, he added.
Trump has also pushed European and Asian allies to spend more on security. A desire for more military funding may now spread to the Middle East, according to Jefferies analyst Sheila Kahyaoglu. US contractors would capture much of that new business from the region, which already accounts for a significant portion of their foreign military sales, she said.
In Europe, BAE rose as much as 8.3%, though some peers slipped. Japan’s Hosoya Pyro-Engineering Co., China’s J-35 stealth fighter maker Avic Shenyang Aircraft Company Ltd. and drone-maker AVIC Chengdu UAS Co. climbed.
Travel and Transportation
Higher oil prices can raise cruise line operators and airlines’ fuel costs, while escalating tensions risk disrupting global travel demand and operations. Carriers across the Persian Gulf have seen their operations thrown into chaos, which may disrupt the finely tuned choreography of global aircraft movements.
American Airlines, Delta Air Lines Inc. and United Airlines Holdings Inc. dropped, while in Europe, IAG plunged as much as 13% — the steepest drop since November 2021. Australia’s Qantas Airways Ltd. slumped 5.4%, Japan Airlines Co. dropped 5.9% in Tokyo and Singapore Airlines Ltd. fell 5.3%.
Leading cruise operators were lower. Carnival slid along with peers Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd.
“The immediate impact will be on airline and travel stocks as we see news of airspace closures over the Middle East and potentially flight cancellations en route to Europe,” said Francis Tan, chief Asia strategist at CA Indosuez Wealth Asset Management.
Each 5% change in Jefferies’ estimate for fuel prices in 2026 translates to a 5% to 10% impact on Delta’s and United Airlines Holdings Inc.’s earnings per share. For American, it represents a 35% impact in either direction, according to analyst Kahyaoglu. Still, the North American carriers have “minimal” direct exposure to Middle East travel, she added, with Air Canada the highest at 1.1% of its capacity.
Hotel operators could be hurt by travel disruptions and reduced demand. InterContinental Hotels Group Plc operates more than 100 hotels across the region, and its shares fell as much as 6.2% in London. French peer Accor SA plunged 11%.
The closing of Middle East airspace also threatens the margins of freight carriers such as FedEx Corp., United Parcel Service Inc. and DHL Group, as longer transit times would drive up fuel costs, according to Bloomberg Intelligence’s Lee Klaskow.
On the other hand, transport snags through the Red Sea and Suez Canal allow container shippers such as AP Moller-Maersk A/S to charge more for their services. Maersk shares rose as much as 7.7% in Copenhagen.
Luxury Goods
For luxury stocks, any event that disrupts travel is never helpful, especially to and from the world’s wealthiest places. According to RBC Capital Markets, the sector may see pressure from the conflict’s near-term impact on consumer confidence, wealth creation and traveler flows.
“We expect luxury stocks to be under pressure given luxury demand typically requires ‘feel good’ backdrop,” wrote RBC’s Piral Dadhania.
A UBS Group AG basket of European luxury-goods stocks fell as much as 4.5% on Monday and extended its year-to-date decline to 10%. Switzerland’s Richemont and Swatch Group AG, which are among the luxury firms most exposed to the Middle East, led declines.
–With assistance from Isolde MacDonogh, Julien Ponthus, Levin Stamm, Abhishek Vishnoi, Winnie Hsu, Neil Campling, Monique Mulima, Matt Turner, Peyton Forte, Andrea Felsted, Sangmi Cha, Arvelisse Bonilla Ramos, Alexandra Semenova and Natalia Kniazhevich.
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