Indian airline stocks bounced back on Tuesday as crude oil prices dropped sharply and geopolitical tensions between the United States and Iran appeared to ease. Shares of InterGlobe Aviation, which operates IndiGo, and SpiceJet gained strongly during early trade after markets reacted to signals that the conflict in the Middle East may not escalate further.
The recovery followed a steep surge in crude prices in the previous session, which had rattled global markets and raised concerns about higher operating costs for airlines.
InterGlobe Aviation climbed as much as 5.6% to touch an intraday high of Rs 4,475.25, while SpiceJet surged about 7.7% to Rs 14.08 during morning deals on March 10.
The rally reflected investor optimism that easing tensions and falling fuel prices could support airline profitability. Aviation turbine fuel (ATF) accounts for a large share of airline operating costs, making the sector highly sensitive to movements in crude oil prices.
The gains also helped airline stocks recover part of the losses triggered by last week’s geopolitical escalation.
Brent crude declined sharply after US President Donald Trump indicated that the conflict with Iran could end sooner than feared. He also signalled that the United States may consider easing certain oil-related sanctions to stabilise global energy markets.
Oil prices fell nearly 10% in early trade before trimming losses. By around 9:15 am IST, Brent crude was trading close to $99 per barrel, down about 6%.
The Group of Seven (G7) countries also said they were ready to release strategic oil reserves if needed to ensure adequate global energy supplies.
The Indian economy, which relies on oil imports, benefits when crude oil prices decline. The country will experience reduced inflationary pressure and lower import costs when prices fall.
The decline in fuel costs benefits aviation companies. Airlines usually experience lower profit margins when oil prices rise because fuel costs constitute their largest operating expense.
The Middle East's geopolitical tensions escalated last week, creating operational difficulties for airlines. United States and Israel forces conducted attacks on Iran, which resulted in retaliatory strikes throughout the entire region.
IndiGo decided to suspend all flights to and from the Middle East due to growing safety concerns amid the ongoing conflict. The situation has improved, with tensions easing and oil prices stabilizing, allowing airlines to resume normal operations while investors become more optimistic.