The ongoing conflict in the Middle East has exerted significant pressure on the global aviation industry, with shares in major airlines dropping sharply amid rising oil prices. Airlines such as Hong Kong's Cathay Pacific, Australia's Qantas, Singapore Airlines, and Japan Airlines experienced declines of over 5% following weekend strikes on Iran by the US and Israel. Analysts warn that prolonged hostilities could have impacts comparable to the COVID pandemic era.
Oil prices surged by 7%, reaching levels not seen in months, as attacks damaged tankers and disrupted shipments from major oil-producing regions. Market reactions included a 10.4% plunge in Qantas shares and further declines in other Asian carriers including ANA, Air China, China Southern, and China Eastern. Despite the turbulence, Qantas reported no impact on its flights due to the absence of operations in Middle Eastern airports, while airlines like Cathay Pacific and Singapore Airlines announced cancellations and suspensions to Middle East routes.
Aviation analyst Brandan Sobie explained that Gulf carriers are the most affected, with some suspending operations entirely. He highlighted that Dubai, Abu Dhabi, Doha, and other Gulf hubs handle over 230 million passengers annually, a significant portion of international traffic, which is now under threat. Sobie also noted that East Asian airlines have limited exposure but face higher operational costs and longer flights to Europe due to airspace closures, potentially benefiting from increased demand on alternative routes.
“The impact of the conflict on airline profitability hinges on the duration of hostilities,” said Sobie. “Longer war means higher costs and reduced connectivity, especially for airlines reliant on Middle Eastern transit hubs.”
Furthermore, Chinese carriers such as Air China, China Eastern, and China Southern are offering more flexible refund policies for flights affected by the conflict, allowing changes or refunds for tickets booked before late February on Dubai, Abu Dhabi, and Riyadh routes.
Subhas Menon, outgoing director general of the Asia Pacific Airlines Association, emphasized that supply chain disruptions and airspace closures are principal threats to the aviation sector. He warned that with Russian/Ukrainian airspace still restricted, European routes are costly to serve, which could undermine airline profitability and connectivity. The conflict's duration will significantly influence the industry's recovery prospects.
