Oil crashing on Iran peace hopes — ride the airline and travel rally
Oil prices just dropped sharply — over 5% in two days — because the U.S. and Iran appear to be moving toward a peace deal that would reopen a critical shipping route. Airlines and travel stocks are surging as fuel costs look set to drop.
Idea
Airlines are one of the most fuel-sensitive businesses out there — jet fuel is their biggest cost after labor. When oil collapsed more than 5% this week on signs the U.S. and Iran are nearing a deal to reopen the Strait of Hormuz, Delta and United immediately became some of the best-performing stocks in the entire market. If a deal actually materializes, oil could slide even further, giving airlines a multi-week tailwind. Even the possibility of a deal is enough to keep travel stocks bid, as we saw Wednesday. The risk is that talks fall apart and oil snaps back, so keeping a tight stop makes sense.