Shares in British Airways owner International Consolidated Airlines Group SA fell sharply after thousands of flights to and from the Middle East were cancelled, following the US and Israel's military strikes on Iran that sparked retaliatory attacks on various states.
US-Israel attacks on Iran began on Saturday, with the response including missile and drone strikes against regional allies, including Qatar, United Arab Emirates, Saudi Arabia, Bahrain and Kuwait, with a British base in Cyprus also targeted. One person was reported killed and 11 others injured at airports in Dubai and Abu Dhabi.
Airports in major travel centres such as Dubai, Doha and Abu Dhabi were closed as a result, affecting hubs that normally carry around 90,000 passengers per day via Emirates, Qatar Airways and Etihad airlines. Dubai International is the world's busiest airport for international passenger traffic.
BA also cancelled services to Tel Aviv and Bahrain until at least Wednesday and said flights between London Heathrow and Abu Dhabi, Amman, Bahrain, Doha, Dubai or Tel Aviv could be affected for several days.
Early on Monday, 1,239 flights had been cancelled across various airlines, according to FlightAware, following nearly 6,000 cancellations over the weekend.
IAG shares fell 5.4% to 400.9p, having last week risen to their highest level since before the pandemic.
Wizz Air Holdings PLC fell 6.4% to 1,142p, while in mainland Europe Lufthansa dropped 6.7% and Air France KLM 9.1%.
Short-haul carriers did not escape, with easyJet PLC dropping 3.4% to 448p, though the furthest east it flies is Turkey and Egypt, with plans to resume services to Tel Aviv this month.
Engine makers, too, with Rolls-Royce Holdings PLC falling 2.4% as JPMorgan highlighted how it would be affected.
"Prolonged instability or further escalation would likely lead to sustained disruption and dampen demand for air travel to the region," strategists at the US bank said.
Data from Cirium indicates that 6% of the world's in-service fleet of passenger (western-built) aircraft are currently with Middle East operators, although this does not capture non-Gulf airlines flying to and via the region, which the bank said meant the underlying exposure is likely much higher.
"With many engine OEMs now providing aftermarket services through long term agreements, we must also consider the potential impact on cash generation from such disruption. Rolls Royce has the highest exposure to this business model, and we note that 11% of Trent-engined in-service aircraft are currently with Middle East based operators, according to Cirium."
Meanwhile, shares in defence companies were lifted, as well as those in oil producers.
** UPDATE: Adds details, comment **