<figure id="attachment_3300693" aria-describedby="caption-attachment-3300693" style="width: 1600px" class="wp-caption aligncenter"><img loading="lazy" class="size-full wp-image-3300693" src="https://media.freemalaysiatoday.com/wp-content/uploads/2026/03/e069090d-airplanes-tarmac-epa-09_03_26.webp" alt="" width="1600" height="1000" /><figcaption id="caption-attachment-3300693" class="wp-caption-text">Analysts warn of a travel slump and aircraft grounding as the US-Israel war with Iran disrupts airspace and drives up fuel prices for airlines globally. (EPA Images pic)</figcaption></figure>
HONG KONG: Airline stocks were hammered on Monday, while airfares soared as the US-Israeli war with Iran sent oil prices surging, sparking fears of a deep travel slump and the potential for the widespread grounding of planes.
Oil prices were trading more than 15% higher at levels not seen since 2022 &#8211; as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market. At one point, Brent crude futures jumped as much as 29%.
That promises to pile pressure on carriers already navigating tight airspace as travellers scramble to evade the Middle East conflict.
In Asia, airlines bearing the brunt of investor fears included Korean Air Lines which tumbled 8.6%, Air New Zealand which lost 7.8% and Hong Kong&#8217;s Cathay Pacific which lost 5%.
Underscoring that pain on the consumer side were jumps in ticket prices. Direct flights from Seoul to London on March 11 with Korean Air Lines, for example, leapt to US$4,359, up from US$564 seven days earlier, according to Google Flights data.
&#8220;The issue for the airlines now is that travel demand may be curtailed as costs become prohibitive for leisure travelers and as some companies start to limit business travel due to the uncertain outlook,&#8221; said Lorraine Tan, director of equity research, Asia at Morningstar.
The impact of high airfares could limit travel demand for much of 2026, Tan added.
In Europe, Air France KLM, British Airways owner IAG and Lufthansa fell between 4% and 6% in early trade, while major US airlines were down about 4% in pre-market trading.
Fuel is the second-largest expense for air carriers after labour, typically accounting for a fifth to a quarter of operating expenses. Some major Asian and European airlines have oil hedging in place, but US airlines largely stopped the practice over the last two decades.
&#8220;If crude is rising 20%, jet fuel is rising several times more as it is even more scarce, adding significant cost to operations together with crew resources which are stretched due to longer flying times when airspace is closed,&#8221; said Subhas Menon, head of the Association of Asia Pacific Airlines.
That could have dire implications for the industry.
&#8220;Absent near-term relief, airlines around the world could be forced to ground 1,000s of aircraft while some of the industry&#8217;s financially weakest carriers could halt operations,&#8221; Deutsche analysts said in a note to clients.
They also noted that a sharp spike in jet fuel costs in 2005 in the aftermath of hurricanes Katrina and Rita resulted in widespread and significant damage to the industry, including major airlines Delta and Northwest filing for Chapter 11 bankruptcy that year.
Since Feb 28, when the US-Israeli war on Iran started, through March 8, more than 37,000 flights to and from the Middle East have been cancelled, according to data from Cirium.
With airspace severely constrained, airlines have been forced to reroute flights, carry extra fuel or make additional refuelling stops to guard against sudden diversions or longer flight paths through safer corridors.
Combined, Emirates, Qatar Airways and Etihad normally fly about one-third of passengers from Europe to Asia and more than half of all passengers from Europe to Australia, New Zealand and nearby Pacific Islands, according to Cirium.
In Oman, Muscat International Airport has asked private jet operators to avoid using the site for &#8220;additional flights,&#8221; giving priority to government and commercial flights as fresh airspace closures hit the region’s attempts to increase travel, according to an email seen by Reuters.
Flights to Iraq, Syria, Lebanon and Jordan by Turkish Airlines, AJet, Pegasus and SunExpress have been cancelled until March 13, Turkish Transport Minister Abdulkadir Uraloglu said on Sunday.
Flights in the United Arab Emirates have been heavily disrupted.

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