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Indian aviation stocks have fallen today, March 2, mainly due to increasing geopolitical tensions in the Middle East impacting crude oil prices.

InterGlobe Aviation (IndiGo) shares has witnessed a fall by over 5%, while SpiceJet shares are down close to 4% in early trading as the ongoing conflict affects key transit points and raises worries about surging fuel costs.

The Iran-Israel conflict has resulted in the closure of significant airspaces in the Gulf region. Indian airlines, such as IndiGo, Air India, and SpiceJet, have cancelled more than 350 international flights as of yesterday, with additional disruptions and technical stops (for instance, in Rome for North American routes) continuing into today.

As per reports, analysts have indicated that IndiGo could see a potential 13% decline in its Earnings Per Share (EPS) for each $5 rise in Brent crude prices. Fuel usually represents 40% of an airline's operational costs, making the industry particularly vulnerable to the recent spike in oil prices.

In order to preserve links to the US and Europe, airlines are adjusting flight paths, which is anticipated to lead to longer flight durations and increased operational costs.

Harshal Dasani, Business Head, INVasset PMS, explained that aviation is under pressure as crude prices harden and uncertainty rises. Fuel accounts for a significant portion of airline operating costs, and any sustained spike in oil directly compresses margins. Add to that potential airspace disruptions, higher insurance premiums, and weaker discretionary travel demand if tensions persist — the risk profile for the sector rises sharply.

(more to come)Dhanya Nagasundaram is a Content Producer at Livemint, specialising in financial markets, and business news. With over eight years of experience in j...

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