Airline Stocks Tumble as Iran Conflict Fuels Jet Fuel Cost Concerns

Key Takeaways

• President Trump’s recent Iran war commentary suggested a longer conflict timeline than investors anticipated, triggering airline stock declines.
• Jet fuel costs have skyrocketed approximately 70% since hostilities between the U.S., Israel, and Iran commenced.
• Both United Airlines (UAL) and Southwest (LUV) ranked among the S&P 500’s weakest stocks on Thursday.
• Analysts at TD Cowen reduced price targets throughout the airline industry, pointing to persistent fuel expenses and weakening travel patterns.
• TD Cowen revised UAL’s price target down to $120 (previously $140) and LUV’s to $46 (from $56), while maintaining Buy recommendations on both carriers.

Airline equities tumbled Thursday following President Trump’s recent statements regarding the Iran conflict, which disappointed investors hoping for a near-term resolution. Market participants had been anticipating a rapid conclusion to hostilities — along with the accompanying relief in fuel prices. Those expectations quickly dissolved.

United Airlines (UAL) declined 3.2% while Southwest Airlines (LUV) retreated 2.3%, positioning both carriers among the S&P 500’s poorest performers on a day when the broader index slipped only 0.2%.

United Airlines Holdings, Inc., UAL

Delta Air Lines (DAL) slipped 1.4%, JetBlue (JBLU) decreased 1.8%, and American Airlines tumbled 3.8%. The U.S. Global JETS ETF fell 2%.

During Wednesday’s remarks, Trump indicated the Iran conflict is “nearing completion” while emphasizing that “we must honor the dead by completing the mission.” Investors interpreted this as a signal that hostilities will continue longer than expected.

Jet fuel valuations have climbed approximately 70% since the commencement of the U.S. and Israel-led military operations against Iran. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot price reached $4.344 per gallon on March 20 — its highest level since May 2022. Prior to the conflict’s start on February 27, the price stood at $2.428 per gallon.

Such dramatic price movements create severe profitability challenges for airline operators.

TD Cowen Reduces Price Targets Industry-Wide

TD Cowen’s analyst Tom Fitzgerald reduced price objectives across the airline sector Thursday. His rationale centered on expectations for sustained elevated energy costs and weakening credit card expenditure trends.

“We lower our estimates for the big 6 U.S. airlines with fuel looking likely to remain elevated vs. antebellum prices for the remainder of 2026,” Fitzgerald stated.

TD Cowen adjusted its United Airlines price target downward to $120 from $140, while retaining its Buy rating. The firm considers Delta the most defensive selection currently, though it continues to view United as the most compelling long-term investment.

Regarding Southwest, TD Cowen decreased its target to $46 from $56, also preserving a Buy rating. The firm acknowledged that its Southwest earnings projections now trail broader Wall Street consensus ahead of first-quarter results.

Fitzgerald emphasized that carriers with “higher leverage levels and/or greater fuel sensitivity” confront the most challenging near-term environment. He specifically identified American Airlines, JetBlue, and Alaska Air Group as having the greatest exposure.

Southwest Faces Headwinds as Projections Trail Consensus

Southwest approaches earnings season from a challenging position. TD Cowen’s below-consensus forecasts, coupled with indications of softening demand and climbing expenses, establish low expectations — but also heightened risk.

Southwest has declined 7.1% year-to-date, with average daily trading volume exceeding 10 million shares. The carrier’s market capitalization stands at $18.78 billion.

Notwithstanding the target reductions, TD Cowen maintained Buy ratings on both UAL and LUV, indicating the firm views current weakness as cyclical rather than fundamental. Fitzgerald observed that “further volatility” may generate “attractive buying opportunities” in United shares.

The U.S. Gulf Coast jet fuel spot price continues hovering near multi-year peaks as the sector enters Q1 earnings season.