The share price of the country’s largest airlines fell 10% in Wall Street trading on Monday, as a surge in oil prices fueled by Russia’s incursion into Ukraine delays carriers’ recovery from the pandemic.
Shares of United Airlines fell more than 10% during trading on Monday, while shares of Delta lost about 8%.
American Airlines shares fell about 7% on Monday.
Earlier Monday, oil prices rose to their highest level in more than a decade as the Biden administration mulls a potential ban on imports from Russia in response to an invasion of Ukraine, a move that could further upend the global energy market.
Brent oil rose to almost $140 a barrel overnight as the market reacted to the possibility of a ban. This has risen sharply from prices that hovered around $70 back in August.
The Russian invasion of Ukraine has caused oil prices to soar in recent days, which likely forced US carriers to cut their revenue expectations. STEPHANIE REYNOLDS/AFP via Getty Images
The escalating energy crisis is scaring investors on Wall Street, causing them to run out of stocks. The Dow Jones Industrial Average fell more than 680 points, or more than 2%, while the broad-based S&P 500 fell more than 2.5% and the technology-focused Nasdaq fell about 3%.
The Russian-Ukrainian conflict is also causing price spikes for other goods. Gold jumped 1% to nearly $2,000 an ounce on Monday.
The sharp rise in fuel costs is likely to force airlines to lower their first-quarter earnings and revenue estimates.
The largest US domestic carriers are still struggling to recover from losses caused by the spread of the Omicron variant.
The aviation industry has struggled to recover after being hit by the coronavirus pandemic. Jose M. Osorio/Chicago Tribune/Tribune News Service via Getty Images
American Airlines lost $931 million in the fourth quarter of 2021 on revenue of $9.43 billion, down from $11.3 billion in the same quarter of 2019.
United Airlines reported a loss of $646 million in the fourth quarter, while domestic rival Delta reported a loss of $408 million in the fourth quarter of 2021.
Even before the invasion of Ukraine, airlines expected that the decline in the incidence of Omicron, the lifting of restrictions due to the pandemic and warmer weather would lead to a resumption of demand for air travel.
But higher fuel prices are likely to delay those plans.