Shares of leading U.S. airlines American Airlines (AAL), Delta Air Lines (DAL), and United Airlines (UAL) soared in pre-market trading on Wednesday. The rally followed a two-week ceasefire agreement in the U.S.-Israel-Iran war that was announced late Tuesday, providing some relief to investors.
Claim 55% Off TipRanks
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Discover top-performing stock ideas and upgrade to a portfolio of market leaders with Smart Investor Picks
Airlines Get a Critical Break
Airlines across the globe have been battling high jet fuel costs as the near-grounding of the strategic Strait of Hormuz — through which about 20% of the world’s fuel supply passes — led to surges in energy prices and stoked fears of a slowdown in travel demand. However, oil prices sank below $100 per barrel following the ceasefire deal.
Estimates had shown that top U.S. airlines were set to spend an extra $11 billion on jet fuel this year due to the spike in oil prices.
United Airlines CEO Scott Kirby had also warned that rising jet fuel prices could result in a “meaningful” hit on the carrier’s first-quarter results. Moreover, Delta Air Lines on Tuesday made a similar move to that of rival United Airlines, raising its checked bag fees for the first time in two years to offset the rising cost of jet fuel.
U.S. and Iran Agree to Reopen Strait of Hormuz
However, President Donald Trump at 6:32 p.m. ET on Tuesday announced the U.S. agreement to suspend attacks on Iran’s infrastructure for a two-week period “subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.” The American leader said he received a 10-point proposal from Iran that he believes is a “workable basis” for negotiation.
“Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two-week period will allow the Agreement to be finalized and consummated,” Trump further wrote on his Truth Social account.
Seyed Abbas Araghchi, Iran’s foreign affairs minister, also took to X to announce plans to cease “defensive operations” on the strait if attacks against the country are halted.
Which Is the Best Airline Stock to Buy?
TipRanks’ 10 Top Airline Stocks tool shows that United Airlines offers the biggest upside of about 50%. This is based on an average price target of $134.43 that comes with a Strong Buy rating.
