IndiGo, SpiceJet jump up to 7% as crude oil tumbles on hopes of Iran peace deal

Shares of airline operators InterGlobe Aviation, the parent of IndiGo, and SpiceJet surged in Friday's trade after crude oil prices declined sharply following remarks by US President Donald Trump that a deal to end the conflict with Iran was close to being finalised.

InterGlobe Aviation shares rose as much as 4 per cent during the session, while SpiceJet rallied up to 7 per cent, as investors cheered the prospect of lower fuel costs for airlines.

IndiGo opened 2.15 per cent higher at Rs 4,599 and touched an intraday high of Rs 4,680. SpiceJet opened at Rs 11.65 and climbed to Rs 12.31 during the day.

Crude oil retreats on Iran deal hopes

The rally in airline stocks came after Trump said he had shelved plans for a military strike on Iran and indicated that an agreement to end hostilities was nearly complete. He added that the deal could be signed over the weekend in Europe.

The comments eased concerns over potential disruptions in the Strait of Hormuz, a critical global oil shipping route, prompting a decline in crude prices.

Brent crude fell 1.5 per cent to $89.08 a barrel, while US West Texas Intermediate (WTI) crude dropped 2 per cent to $86.08 per barrel. Oil prices are now trading near two-month lows.

Lower fuel costs lift airline sentiment

The decline in crude prices is particularly significant for airlines, as aviation turbine fuel (ATF) is one of their largest operating expenses.

Industry estimates suggest ATF accounts for around 40 per cent of an airline's operating costs and can rise to nearly 60 per cent during periods of elevated fuel-price volatility. Any sustained fall in crude oil prices typically improves airline profitability by reducing fuel bills.

India's aviation sector has been under pressure in recent months due to the conflict in West Asia, which pushed up crude and jet fuel prices while also forcing airlines to contend with airspace restrictions and longer flight routes.

According to reports, international jet fuel prices had surged to as much as Rs 142 per litre in May from pre-conflict levels of around Rs 60.50 per litre, raising concerns about higher operating costs and potential airfare increases.

ATF pricing changes remain in focus

The market reaction also comes days after state-owned oil marketing companies introduced a fuel price stabilisation mechanism for domestic carriers.

Under the scheme announced earlier this week, airlines can opt to purchase ATF at a fixed rate of Rs 115 per litre for up to three years, shielding them from fluctuations in global fuel prices. Participation in the programme is voluntary, while airlines that do not join will continue to pay market-linked rates.

With fuel costs remaining a key determinant of airline earnings, investors are closely tracking developments in crude oil markets and geopolitical tensions in West Asia.