Hong Kong stock movements | Trump's speech turning hawkish pushes oil prices higher. China Eastern Airlines (00670) and China Southern Airlines (01055) both fell more than 4%.

Zhitong Finance APP learned that aviation stocks fell collectively. As of the time of publication, China Eastern Airlines (00670) was down 4.6%, trading at HK$3.73; Southern Airlines (01055) was down 4.02%, trading at HK$4.06; Air China (00753) was down 3.01%, trading at HK$4.83; Cathay Pacific Airways (00293) was down 2.56%, trading at HK$11.44.

On the news front, U.S. President Trump delivered a televised address this morning on the situation in the Middle East, warning that the U.S. would launch extremely severe strikes against Iran within the next two to three weeks, and even threatening to bomb local power plants if the two sides failed to reach an agreement. His remarks turned tougher, reducing the market’s original hopes that the war would end quickly. Affected by this, international oil prices surged significantly. As of the time of publication, WTI crude oil was up more than 4%, at US$104.35 per barrel. Brent crude oil was up nearly 5%, at US$106.195 per barrel.

Cathay Haitong Securities noted that airlines’ fuel costs account for approximately 35%. Under a static calculation, the impact on profitability is huge. It also said that the actual impact depends on supply and demand. China’s air transportation supply has entered a period of low growth. Demand will fully benefit from the boost to consumption, and if supply and demand continue to improve, it will ensure that the impact of oil prices is smaller than concerns. For domestic routes, fuel surcharges will be imposed and the increases in oil prices will be covered to a large proportion. If supply and demand continue to improve, it will help facilitate the actual transmission. For international routes, due to the Middle East conflict significantly affecting the operation of international hubs in Europe-Asia and places such as Dubai/Doha, the Central Europe routes will benefit from the return flow of domestic transshipment and the addition of international transshipment, with ticket prices jumping sharply, which will further offset part of the oil price increases.