LONDON/SYDNEY/HONG KONG, March 2 (Reuters): Travel shares fell sharply on Monday as escalating conflict between the US, Israel and Iran disrupted flights around the globe, forced the closure of key Middle Eastern hubs and sent oil prices surging.
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 per cent to their highest in months as Iran and Israel stepped up attacks, damaging tankers and disrupting shipments from the key producing region.
Shares in TUI, Europe's largest travel company, dropped 7 per cent in early trade, while British Airways-owner IAG was down 9 per cent, and Lufthansa and Air France-KLM both fell 7 per cent. Hotelier Accor and cruise company Carnival also fell sharply.
US airline shares dropped around 5 per cent in pre-market trading.
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.
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 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 per cent.
Cathay Pacific, which fell as much as 7 per cent before trimming losses to 2.9 per cent, 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.
"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 per cent 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.
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