Airline stocks experienced significant declines following remarks from President Trump that dashed market hopes for a swift resolution to the ongoing U.S. and Israel-led conflict with Iran. The geopolitical uncertainty has triggered a sharp surge in jet fuel prices, directly threatening the profitability of major U.S. carriers.
United Airlines (UAL) and Southwest Airlines (LUV) were among the worst performers on the S&P 500, with UAL falling 3.2% and LUV dropping 2.3% in Thursday's trading session. Other major airlines also felt the pressure: American Airlines dropped 3.8%, JetBlue (JBLU) fell 1.8%, and Delta Air Lines (DAL) slid 1.4%. The broader U.S. Global JETS ETF declined by 2%.
The core issue is the dramatic increase in fuel costs. Jet fuel prices have surged roughly 70% since the conflict began on February 27. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot price peaked at $4.344 per gallon on March 20, its highest level since May 2022, compared to a pre-war price of $2.428 per gallon.
This cost spike has an immediate and severe impact on airline economics. Melius Research analyst Conor Cunningham provided a stark example, noting that a typical 737-800 flight on a competitive domestic leisure route has swung from a $1,500 profit to a $3,900 loss at current fuel prices. He explained that while revenue and non-fuel costs are largely fixed by pre-conflict bookings, fuel costs have nearly doubled.
In response to the deteriorating outlook, TD Cowen analyst Tom Fitzgerald trimmed price targets across the sector on Thursday. TD Cowen cut its price target for United Airlines to $120 from $140 and for Southwest Airlines to $46 from $56, though it maintained Buy ratings on both. Fitzgerald cited the "likelihood of prolonged high energy prices" and decelerating credit card spending data as primary reasons for the adjustments.
Fitzgerald warned that airlines with "higher leverage levels and/or greater fuel sensitivity" face the toughest near-term conditions, specifically naming American Airlines, JetBlue, and Alaska Air Group as the most exposed. Despite the cuts, the firm views Delta as the most defensive play currently and United as the most attractive long-term option.
While U.S. travel demand has shown resilience so far—with TSA screening 78.54 million passengers in March, up from 77.23 million a year ago—analysts caution that the full effect of prolonged high fuel costs may still materialize and curb future demand. The sector now braces for Q1 earnings season, beginning with Delta's report on April 8, as investors watch closely to see if carriers can navigate this challenging landscape of elevated costs and geopolitical uncertainty.
