Airline companies across Europe, including International Consolidated Airlines Group SA (LSE:IAG) and easyJet PLC (LSE:EZJ) in London, flew higher on Wednesday morning as investors continued to react to the back and forth of the Middle East conflict.
Oil prices had softened but only very moderately, after a deal made by Iraq to transport oil across Turkey and avoid having to use the Strait of Hormuz. Brent crude eased 0.5% to just under $103 a barrel, remaining in the channel it has occupied in recent days.
In the airline sector, Qatar Airways said it will be resuming flights to around 80 destinations from today.
However, yesterday, British Airways said it will suspend flights to Israel, Dubai, Bahrain and Amman until at least June, with Doha paused until the end of April and Abu Dhabi halted indefinitely, citing “ongoing uncertainty” and “instability in the airspace” across the Middle East and Persian Gulf.
Analysts at Citi noted that short selling had been "unsurprisingly rising" for most carriers. For IAG, they noted that there has been close to no change in short or long positioning month-on-month, but similarly to Ryanair, more investors have added to long positions week to week, with shorts cut. "Positioning remains most negative at easyJet and Wizz," they said.
As for the wider scene for stocks and bonds, there appears to be "a bit more calm in markets at the moment and a small hint that there is a decoupling from the price of oil", said Jim Reid, macro strategist at Deutsche Bank, noting that the past 24 hours have seen more positive risk markets and lower yields in spite of Brent crude closing above $100 a barrel for a fourth consecutive session.
In opening trades on Wednesday, FTSE 100 names easyJet and British Airways owner IAG both rose over 2.3%, while mid-cap Wizz Air Holdings PLC (AIM:WIZZ) was up 2%.
In Europe, Ryanair Holdings PLC (LSE:RYA), Deutsche Lufthansa and Air France KLM all rose around 1.5%-2.5%.
This optimism came despite escalating fighting in and around Iran, with no clear resolution in sight, as Israel claimed responsibility for a strike that reportedly killed Iran's security chief.
Meanwhile, President Trump pledged to expand attacks on Iran's Kharg Island oil hub for Iran's oil exports, and neighbouring Gulf nations continued to try to fend off drone assaults.