Airlines and cruise lines rallied early Monday as oil prices dropped sharply in response to a restrained Israeli retaliatory attack against Iran.
Monday's early market action showed Norwegian Cruise Lines and Carnival Cruise near the top of the S&P 500 with gains of roughly 4%. Royal Caribbean posted a smaller gain. Airlines were also in the mix, with American Airlines Group, Alaska Air Group, United Airlines and Delta Air Lines all rallying hard.
Conversely, oil producers APA Corp., Diamondback Energy and Devon Energy led the downside among S&P 500 stocks. Chevron sat at the bottom of the Dow Jones Industrial Index with a 2% loss. On the S&P Midcap 400, Noble, Matador Resources and Permian Resources traded down more than 3%.
U.S. oil prices shed more than 6% Monday, with West Texas Intermediate futures falling to near $67 a barrel, according to CME Group. WTI had swung above $77 in early October, as fears of direct Israel-Iran conflict intensified. Oil had traded near $87 in April after Israel bombed Iran's consulate complex in Damascus. The move broadened Israel's retaliatory war against Iran-backed militant group Hamas in Gaza, which was also widening to Lebanon, home to another of the region's anti-Israel militant groups, Hezbollah.
Israel Attacks Iran
Israel had pledged a response to the Oct. 1 missile attack launched by Iran against Israel.
Despite concerns that Israel would destroy portions of Iran's oil supply chain, Israeli Defense Forces appear to have limited airstrikes to military and weapons-related sites, according to the BBC.
Iran's military reported one civilian and four soldiers killed in the attacks.
U.S. news agency Axios reported that Israel on Friday made clear "in advance what they are going to attack in general and what they are not going to attack." Axios cited unnamed sources, and said the warning was an attempt to limit the ongoing exchange of attacks. Israel denied that it had sent a warning.
Status Of Israel/Hamas Peace Talks
U.S. Secretary of State Antony Blinken's 11th trip to the Middle East ended on Friday. Israel launched its first direct attack on Iran before dawn on Saturday. During Blinken's visit to Qatar, he said on Thursday that negotiators were set to further talks toward an Israel/Hamas cease fire in the coming days.
"What we really have to determine is whether Hamas is prepared to engage," Blinken said, according to The Associated Press.
Meanwhile, Hamas announced via Lebanese media there had been no change in their position, following Israel's killing of Hamas founding leader Yahya Sinwar on Oct. 17. Sinwar had reportedly been the leading voice in Hamas resistance to a cease-fire agreement.
For its part, Israel continued its wars against Lebanon and Gaza, bombing the Lebanese city of Tyre on Monday.
And for Blinken, a calibrated Israeli counterattack against Iran could open the chance for long elusive diplomatic goals in the region.
The peace talks stem from the surprise Oct. 7, 2023, attack by Hamas on Israeli civilians which started the current conflict. The attack killed 815 civilians, a total of 1,195 persons in Israel. Another 251 people were taken captive, and taken back across the border into Gaza.
Israel reports that 117 hostages were returned alive. Another 37 bodies were returned dead. Some 97 of the captives remain unaccounted for.
U.S. Involvement In Conflict
The U.S. has made a series of recent moves, attempting to balance support for Israel with aims to reduce overall conflict in the region.
The U.S. intensified its sanctions against Iran on Oct. 11, following Iran's firing of approximately 180 missiles into Israel on Oct. 1. The widened sanctions open the U.S. Treasury department to imposing penalties against anyone involved in Iran's oil economy. New targets include the owners and operators of Iran's "ghost ships," hauling Iranian crude illegally, primarily to India and China.
The U.S. also, on Oct. 16, attacked five weapons storage facilities in Yemen. The underground caches held weapons used by the Houthis to attack ships in the Red Sea and Gulf of Aden, according to CNN. The Houthis have for months targeted ships in the Red Sea, one of the world's busiest waterways, calling the attacks a response to Israel's war in Gaza against Hamas. An X post from the Houthi organization following the attack pledged retribution against the U.S.
In the run-up to Israel's attack against Iran, the U.S. also leveraged Israeli cooperation through delivery of a Terminal High Altitude Area Defense system. The U.S. delivered the THAAD, along with 100 U.S. soldiers to operate it and bolster Israel's air defenses ahead of Saturday's retaliatory attack.
Before deploying the system, Reuters reported, the United States wanted to know Israel's attack plans. Biden held a call with Netanyahu on Oct. 9, which gave the United States an understanding of what the Israeli response would look like, allowing the THAAD deployment to go forward, officials told Reuters.
U.S. Stocks: Carnival, American Airlines Lead
Cruise ship operators and airlines often rally when oil prices pull back. The move allows them to lock in contracts for future fuel purchases at lower prices. Fuel is a major expense for both industries.
Carnival punched nearly 5% higher, to its highest mark since early 2022. It recently cleared long-term resistance around 20, and is up 15% from a September breakout.
American Airlines also added more than 4% Monday, extending its move up the right side of a five-month cup. Shares are up about 51% since August, leaving them about where they started the year.
United Airlines jumped to its highest mark since February 2020. Shares are up 108% since early August.
