The geopolitical tensions in the Middle East are having a significant impact on the aviation sector. Hong Kong-listed airline stocks fell sharply on Monday as investors feared that rising oil prices would significantly increase airlines' operating costs.
Sell-off in the Aviation Sector
According to Refinitiv data, China Eastern Airlines' H shares fell as much as 13.1% during the day.
Other airlines also saw significant declines:
Cathay Pacific fell about 7.3%
China Southern Airlines fell about 10%
Air China fell about 10.7%
Fuel expenses account for a high proportion of airlines' cost structure, making them highly sensitive to fluctuations in crude oil prices.
Geopolitical Risk Drives Oil Prices Higher
Market volatility is linked to the escalation in the Middle East situation. Iran announced that Mojtaba Khamenei will succeed as the supreme leader, indicating that the hardliners remain in power after a week of conflict with the U.S. and Israel.
Investors are concerned that prolonged conflict may affect global energy supplies, thus driving up international oil prices.
Safe-Haven Flows into the Dollar
Asian stock markets weakened overall, with global funds flowing into safe-haven assets.
The dollar index rose, reaching a three-month high against the euro. Analysts pointed out that if geopolitical risks persist, volatility in global financial markets may further intensify.
