Have Fuel, Will Travel: Airline, Cruise Stocks Gain Momentum with Iran Deal

Little more than a week ago, the International Air Transport Association warned that global airline profits could drop by half this year, sliding to $23 billion. The skyrocketing price of jet fuel caused by the war in Iran would add an estimated $100 billion in collective costs for the industry in 2026, the trade group said.

Well, with the war possibly, hopefully, over after Washington and Tehran agreed to an interim peace deal, airline shares joined a jubilant market rally Monday. However, the details suggest it may be some time before the anticipated reopening of the Persian Gulf to oil shipments allows carriers to ride economic tailwinds.

Trickle-Down Oilonomics

For many would-be travelers, the past three months put a price tag on wanderlust so steep that the hikikomori lifestyle appeared appealing. Soaring crude prices pushed up the cost of plane fuel, and leading carriers passed the onerous increase on to inflation-weary consumers. According to the IATA, global jet fuel prices averaged $1,096 per ton last week, a 54% year-over-year increase. In North America, prices rose 50% to $1,085 per ton. Airline fares climbed an unpleasant 26.7%. Southwest Airlines CEO Bob Jordan told a conference that he couldn’t recall steeper fare hikes at any time in his 38-year career.

The industry, at least, was backstopped by resilient travel demand from wealthy consumers, less affected by fare hikes in keeping with the so-called K-shaped economy (for example, corporate travel platform Navan reported last week that gross booking volumes increased 50% to $3.1 billion in its latest quarter). That sales resilience helped industry stock valuations, with the US Global JETS ETF up 19% in the past 30 days, and optimism grew further on Monday:

• Shares in United Airlines rose 3.9% and closed at a record $119.97, while rivals Southwest Airlines and Delta Air Lines rose 1.3% and 1.2% respectively. 
• “Financial markets are once again excited about a potential Middle East peace deal and the possible resumption of energy flows out of the Gulf,” Chris Turner, ING’s Global Head of Markets, wrote Monday. “Whether that delivers much lower energy prices is highly questionable.”

Smoother Sailing: Like their sky-high airline peers, cruise ship operators are highly exposed to fuel costs and stand to benefit if and when fuel prices come down. Bunker prices for Very Low Sulfur Fuel Oil in Singapore, the global benchmark, were $825 per metric ton in May, up 61% year-over-year, according to Ship & Bunker. Investors appear very bullish on the prospect of those costs falling and margins improving: Royal Caribbean, Carnival and Norwegian Cruise Line were up 6.5%, 3.2% and 3.6%, respectively, on Monday. to Ship & Bunker. Investors appear very bullish on the prospect of those costs falling and margins improving: Royal Caribbean, Carnival and Norwegian Cruise Line were up 6.5%, 3.2% and 3.6%, respectively, on Monday.

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