Oil crumbling on Iran peace hopes, airlines surging — ride the travel rally
Oil prices dropped sharply on hopes that the U.S. and Iran are getting closer to a peace deal, which would reopen a critical shipping route for oil. Cheaper fuel is great news for airlines and travel companies, and investors are piling into those stocks.
Idea
Airlines spend roughly a quarter to a third of their operating budget on jet fuel, so falling oil prices go straight to their bottom line. Delta and United were already among the top performers in the S&P 500 on Wednesday as oil slumped more than 5%. If a U.S.-Iran peace deal materializes and the Strait of Hormuz reopens, oil could keep sliding — giving airlines even more runway. The risk is that the peace talks fall apart, which would reverse the trade quickly. Keep the position sized modestly and use a trailing stop.