Oil crashing on Iran peace hopes, airlines taking off — ride the travel stock rally on Delta and United
Oil prices dropped 3% today on growing signs that the U.S. and Iran may be close to a deal to reopen the Strait of Hormuz, a critical oil shipping route. That's sending airline and travel stocks sharply higher because cheaper oil means lower jet fuel costs.
Idea
Airlines burn through enormous amounts of jet fuel, so when oil drops, their profit margins expand quickly. Oil fell 3% today alone on concrete signs of a U.S.-Iran deal to restore shipping through the Strait of Hormuz. Delta, United, and MGM were among the biggest gainers in the entire S&P 500 as investors piled in. If a deal actually materializes, oil could stay low and these stocks have plenty of room to keep climbing. The risk is that peace talks fall apart and oil snaps back, so keep the position sized modestly.