Airline stocks rise as oil retreats to pre-Iran war levels

Airline stocks rose 3% to 7% on Wednesday as crude oil prices slid to levels not seen since before the Iran war, easing concerns over near-term earnings pressure. The S&P 500 Passenger Airlines index jumped as much as 5% to an all-time high and was up nearly 13% since its close on June 12, after the U.S. and Iran announced a peace agreement. Brent crude futures fell below $74 per barrel, amid signs that more tankers could move out of the Strait of Hormuz, a key conduit for about a fifth of the world’s oil supplies. While carriers could save billions in additional jet-fuel costs, analysts said fare reductions are unlikely immediately due to tight capacity. Morningstar’s Nicolas Owens noted that profitability can swing opposite fuel moves in the short term because many tickets were sold assuming prior fuel costs. UBS said airline third-quarter EPS could beat expectations if fuel prices moderate, with smaller fleets and fewer premium seats expected to benefit more. Frontier, Southwest, Delta, JetBlue, Alaska Air and United all rose, while American Airlines gained about 7%.