Travel stocks wipe out RM88.7b after Middle East war grounds flights worldwide

March 3 — Travel and airline stocks suffered a deep sell-off yesterday, erasing around US$22.6 billion (approximately RM88.7 billion) in global market value as escalating conflict between the United States, Israel and Iran disrupted international air travel and grounded flights around the world.

The turmoil in the Middle East has triggered widespread airspace closures and airport shutdowns, particularly at key Gulf hubs such as Dubai and Doha, which are crucial transit points connecting flights between Asia, Europe, Africa and the Americas. With these major airports closed for several days, tens of thousands of travellers have been left stranded and airlines forced to cancel or reroute services.

The United Nations’ International Civil Aviation Organisation has emphasised that ensuring the safety and security of air transport operations and passengers is the responsibility of individual states, reflecting the enormous logistical challenge posed by ongoing hostilities in the region.

Rising geopolitical tension has also pushed crude oil prices higher, with benchmarks jumping as much as 13 per cent, heightening concerns over fuel costs — a significant expense for airlines. Higher fuel prices and widespread cancellations have been cited by analysts as key drivers of the sharp declines in travel stock prices globally.

Major global airline shares were among the worst hit. U.S. carriers such as Delta Air Lines, United Airlines and American Airlines saw their stocks fall between 2 per cent and 4 per cent, while European passenger and travel companies posted steeper declines.

In Europe, shares in TUI — the continent’s largest travel operator — fell nearly 10 per cent, while Germany’s Lufthansa dropped over 5 per cent and British Airways’ parent company IAG lost more than 5 per cent. Other travel stocks, from cruise operators to tour planners, also recorded steep losses as investor confidence weakened amid fears of prolonged disruption.

Market watchers highlighted that the scope and scale of the sell-off reflect more than just immediate flight cancellations — they underscore broader concerns about reduced travel demand, extended periods of uncertainty and the knock-on effects of higher operational costs for carriers worldwide.

The closure of Middle Eastern airspace is widely seen as the biggest shock to global aviation since the onset of the Covid-19 pandemic. Major hubs such as Dubai International Airport — one of the world’s busiest airports — and Qatar’s Hamad International Airport have remained largely inaccessible to commercial flights since the start of the conflict, exacerbating disruptions for airlines and travellers alike.

Beyond airlines, travel platforms, hotel stocks and other industry players have also been affected. Analysts pointed to higher hedging costs, rerouting expenses, and prolonged cancellations as amplifying pressure on the travel sector’s profitability.

The drop in travel stocks came amid frantic efforts by airlines to reroute flights around the conflict-affected region, as well as travel advisories urging passengers to check flight statuses and defer non-essential travel. Foreign ministries and aviation authorities worldwide have cautioned that the situation remains volatile and subject to swift changes, with airspace restrictions likely to persist shortly.

Investors are now watching closely how long the disruptions might last, as extended closures and elevated fuel costs could have long-term impacts on airline balance sheets, consumer travel demand and broader market sentiment.