US-Iran ceasefire boosts airline stocks; IndiGo up 10%, SpiceJet 5%

Airline stocks rallied as easing of geopolitical tensions has led to a sharp fall in global crude oil prices, which is particularly positive for aviation companies

Shares of aviation sector companies, including IndiGo and SpiceJet, among others, witnessed a sharp rally on Wednesday, April 8, after the announcement of a two-week pause in US military action in Iran. 

 

InterGlobe Aviation, the parent of IndiGo, climbed as much as 10 per cent to ₹4,695.6 on the National Stock Exchange (NSE), with its market capitalisation (m-cap) rising to ₹1.81 trillion. Similarly, SpiceJet shares touched 5 per cent upper circuit to hit a high of ₹11.12, taking its m-cap up to ₹1,700 crore. In comparison, the benchmark NSE Nifty50 index surged to 23,919 levels, up by 795.35 points or 3.44 per cent. 

 

 

Among others, AFCOM Holdings jumped 5.6 per cent, FlySBS Aviation surged 9 per cent, and Global Vectra Helicorp was up 3.5 per cent. 

 

The rally comes as easing of geopolitical tensions has led to a sharp fall in global crude oil prices. Falling crude oil prices are positive for aviation companies, as aviation turbine fuel (ATF), which accounts for 30-40 per cent of airlines’ operating costs, becomes cheaper, helping improve margins.

 

Last checked, Brent crude was down 13.1 per cent at $96.46 per barrel, while US West Texas Intermediate (WTI) crude was down 15.17 per cent at $95.81.  

G Chokkalingam, founder and head of research at Equinomics, said a US-Iran ceasefire would be significantly positive for the aviation sector as it would likely halt the conflict and lead to a further crash in crude oil prices, potentially toward the $70 to $80 range. 

 

"Within the sector, InterGlobe Aviation (IndiGo) remains our top recommendation. As the industry leader with a substantial gross cash position, IndiGo is best positioned to navigate short-term industry volatility and benefit from lower fuel costs," he added.

 

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On Tuesday, US President Donald Trump announced that he has agreed to suspend strikes on Iran for two weeks as part of a ceasefire deal if Tehran completely reopens the Strait of Hormuz. 

 

Iran also agreed to a ceasefire, saying it would guarantee safe passage for maritime traffic through the vital Strait of Hormuz for two weeks. “It is emphasised that this does not signify the termination of the war,” the statement said.

 

However, according to media reports, all vessels transiting the Strait of Hormuz will be subject to a $2 million fee under a "controlled transit" system coordinated with the Iranian armed forces. Iran's Parliament approved a draft bill to formalise the toll, and the revenue will go toward rebuilding the country following the US and Israeli strikes. The country also warned that any halt in military operations depends on the cessation of attacks against it. 

 

During the two-week window, negotiations between the US and Iran are expected to take place in Islamabad, Pakistan. 

 

Tehran has proposed a 10-point peace plan to end the conflict. Key demands include a permanent cessation of hostilities across multiple regions, including Iran, Iraq, Lebanon, and Yemen, reopening of the Strait of Hormuz, lifting of US sanctions, release of frozen Iranian assets, and financial compensation for reconstruction.