Travel sector shares tumble as US-Iran conflict disrupts flights

Impact of US-Iran Conflict on Global Travel and Financial Markets

By Byron Kaye, Hollie Adams and Julie Zhu

LONDON/SYDNEY/HONG KONG, March 2 (Reuters) - Travel shares fell sharply on Monday as escalating conflict between the U.S., Israel and Iran disrupted flights around the globe, forced the closure of key Middle Eastern hubs and sent oil prices surging.

Middle Eastern Airport Closures and Oil Price Surge

Middle Eastern airports including Dubai, the world's busiest international hub, and Doha closed for a third day, leaving tens of thousands of passengers stranded in one of the sharpest aviation shocks in recent years.

Oil prices jumped 7% to their highest in months as Iran and Israel stepped up attacks, damaging tankers and disrupting shipments from the key producing region.

Travel and Airline Shares Plummet

Shares in TUI, Europe's largest travel company, dropped 7% in early trade, while British Airways-owner IAG was down 9%, and Lufthansa and Air France-KLM both fell 7%. Hotelier Accor and cruise company Carnival also fell sharply.

U.S. airline shares dropped around 5% in pre-market trading. 

Analyst Insights on Airline Industry Pressures

Analysts cited rising fuel costs, cancellations and rerouting expenses as the main pressure points for airlines, despite most having hedged their fuel.

"We believe that an active war zone, along with the resulting flight disruptions (due to closure of airspace and airports), is likely to curb travel appetite in the region," said B Riley Securities in a note.

Ongoing Disruptions and Airline Responses

Middle Eastern carriers continued to cancel flights on Monday as analysts warned that disruption could last for weeks.

"Due to the temporary closure of UAE airspace, flydubai has temporarily suspended all flights to and from Dubai until 15:00 (UAE local time) on Tuesday 03 March 2026," a spokesperson for the airline said. 

Asian Airlines and Regional Impacts

Asian airlines were also hit. Japan's ANA Holdings, Air China, China Southern Airlines, China Eastern Airlines, Malaysia's AirAsia X and Taiwan's China Airlines and EVA Airways all fell at least 4%.

Cathay Pacific , which fell as much as 7% before trimming losses to 2.9%, cancelled all flights to the Middle East, including passenger services to Dubai and Riyadh, until further notice. "We are waiving rebooking and rerouting charges for the affected customers," it said.

Singapore Airlines cancelled flights to and from Dubai through March 7, while Japan Airlines suspended Tokyo-Doha flights.

Expert Commentary on Broader Implications

"For (East) Asian carriers, the number of flights they have to the airports that have been shut are rather limited," said Singapore-based independent aviation analyst Brendan Sobie. "But of course you have the potential impact of higher oil prices and the overall political/economic instability globally."

He added that Indian carriers were particularly exposed due to heavy Middle Eastern schedules serving migrant workers and a ban on using Pakistan's airspace on flights to and from Europe.

Air India cancelled flights on Monday between India and Zurich, Copenhagen and Birmingham, as well as to the United Arab Emirates, Saudi Arabia, Israel and Qatar. It said flights to New York and Newark would refuel in Rome.

Data provider VariFlight said mainland Chinese airlines had cancelled 26.5% of flights to and from the Middle East from March 2 to March 8. The pattern pointed to "sharp near-term disruption but relatively limited revisions further out in the week, suggesting carriers are still holding back from broader schedule resets while monitoring developments," it said.

Passengers Scramble to Change Flights

PASSENGERS SCRAMBLE TO CHANGE FLIGHTS 

The ripple effects have hit travellers worldwide. Dubai was the world's busiest international airport in 2024 with 92 million passengers, according to Airports Council International, ahead of London's Heathrow by 13 million. Doha ranked 10th.

Airline Cancellations and Passenger Experiences

Virgin Australia, which leases planes operated by partner Qatar Airways for flights to Doha, cancelled eight flights on Monday and offered free booking changes.

Qatar Airways passengers in Sydney told Reuters they scrambled to rearrange travel with little information from the airline.

Ascanio Giorgetti, 16, and his mother Alessandra Giorgetti, from Italy, arrived to find their Qatar Airways flight to Milan via Doha cancelled. They secured an alternate route home via Los Angeles on another airline.

"We have no information at all, no answer on the phone from Qatar (Airways)," she said, adding the tickets had cost 4,000 euros ($4,708).

Jenni and Doug Stewart, both 78, were flying from Sydney to Scotland via Doha when their flight turned back halfway to Doha.

"We were told the airspace had closed and we were going back to Sydney," Jenni said. "Suddenly we veered towards Perth and we didn't know why, and then it changed again and went to Melbourne."   

They then flew back to Sydney. "It was chaotic in Melbourne, hundreds of people looking for even the vaguest of information," Doug said.

($1 = 0.8495 euros)

Reporting Credits

(Reporting by Byron Kaye and Hollie Adams in Sydney, Shivangi Lahiri and Yadarisa Shabong in Bengaluru, Joanna Plucinska in London, Federico Maccioni in Dubai, Ben Blanchard in Taipei, Julie Zhu in Hong Kong, Samuel Shen in Shanghai, David Dolan and Maki Shiraki in Tokyo, Jun Yuan Yong in Singapore and Juarawee Kittsilpa in Malaysia; Writing by Anne Marie Roantree; Editing by Jamie Freed, Mark Potter and Susan Fenton)