Is the Airline Stock Dip After the Iran Attacks Justified?

Key Points

• Many airline stocks have plummeted by 20% or more in the last month amid the start of war in Iran and related oil price volatility.
• Airline companies face numerous negative pressures related to the war, including canceled flights, the potential for suppressed demand, and more.
• Jet fuel prices and cracks have spiked, meaning that even airlines not doing business within the area of conflict will feel the repercussions.

As the war in Iran appears likely to continue, it may be no surprise to investors that airline stocks have been among the first to feel a significant impact. These shares are closely tied to the cost of fuel, geopolitical stability, and consumer demand—all three of which are increasingly erratic as the war escalates and incorporates a broader geography. Both major carriers and even smaller domestic and regional names have seen their shares decline sharply: Delta Air Lines NYSE: DAL and American Airlines Group Inc. NASDAQ: AAL have dropped by about 22% and 27%, respectively, in the last month.

For investors, a price decline may present an opportunity to fortify a position in the airline industry. However, it will be crucial to consider whether the initial shock of the war—and the associated oil price worries—are sufficient to justify the selloff, despite a solid recent track record of domestic business. Relatedly, if a prolonged conflict might cause further declines, waiting to enter or build up a position in these stocks may be prudent instead.

Major Air Carriers Face Multiple Negative Drivers

Delta, American, and other major airlines have fared particularly badly since the start of the war due to the cumulative impact of multiple negative factors.

First, thousands of commercial flights to and from locations across the Middle East have been canceled—in these cases, airlines often face a range of operational and logistical costs while also dealing with lost revenue potential.

Second, and perhaps more importantly for business more broadly, is the increase in the cost of jet fuel. The Argus US Jet Fuel Index climbed to $3.88 on March 6 from $2.50 just a week before. While the crude oil market has faced significant volatility since the start of the conflict, the petroleum product space has been under even greater stress. Jet fuel prices and cracks—the latter referring to the differential between the price of crude oil and the price of the jet fuel derived from it—have soared.

Finally, consumer demand remains a somewhat more amorphous but still concerning factor. In its last earnings report, Delta was optimistic about demand even despite issues surrounding the government shutdown, thanks to loyalty and cargo growth, improvement in non-ticket revenue streams, and more.

Fellow Big Four member United Airlines NASDAQ: UAL was as well in its Q4 2025 report, citing its highest-ever seat completion factor and a 12% year-over-year (YOY) surge in premium revenue, for example.

As customers anticipate higher gasoline costs and increases in prices on a host of other products due to fluctuations in the oil market, investors may find it likely that leisure travel demand will sink while families divert cash to other necessary expenditures. The impact on the airline industry may not be felt immediately, but this could linger even after oil transport and inventories stabilize.

Can Regional Airlines Fare Any Better?

All of this is to say that even airline companies that are not particularly involved in operating in the Middle East region are likely to continue to be heavily impacted by the war. But what about those that operate domestically only, or those based in other countries?

Unfortunately, these companies have not fared much better, if at all, perhaps due to their dependence upon the price of fuel as well. One modest bright spot is shares of Air Canada TSE: AC, which have only fallen by about 13% in the last month. However, this can hardly be considered a win for the industry.

Some Wall Street analysts have already begun to adjust their expectations accordingly—since the start of the month, for instance, Weiss has downgraded DAL shares to Hold from Buy and two other firms have lowered their price targets. Investors may choose to wait until prices have fallen further before entering a position.

It may also be valuable to watch for short interest trends as a way of gauging how the market believes share prices will behave going forward. Some companies, like American, were already facing increasing short interest prior to the start of the conflict, and this may be exacerbated.

Ultimately, depending upon how long the war continues and how it develops, the start of 2026 may feel eerily similar to the environment at the same time six years prior, as COVID-19 grounded the airline industry worldwide. To reach those levels, share prices would have to fall substantially farther than they already have. Bearish investors may wait to see how low airline stocks can fly.