Investors betting the Iran war is ending are buying up travel stocks

By Bill Peters

Shares of travel names Delta, United and MGM were among the S&P 500's biggest gainers on Wednesday - even as one strategist calls the market's optimism misplaced

Passengers traverse a tunnel last week at Washington Dulles International Airport in Virginia.

Even as the U.S. and Iran debate the state of a prospective peace deal, travel stocks rallied Wednesday thanks to a drop in oil prices, helping prop up U.S. stocks, with the Dow industrials DJIA and benchmark S&P 500 SPX closing at record highs.

The investor optimism comes after soaring oil prices since the start of the Iran war drove up airfares and forced airlines to pare back flight schedules to manage the higher fuel costs, and as the war sours Americans' attitudes about the economy.

Shares of casino and resort giant MGM Resorts International (MGM) were up 9% on Wednesday. Cruise-ship operator Norwegian Cruise Line (NCLH) added 6%.

United Airlines (UAL) rose 6%, while rival Delta Air Lines (DAL) was up 3%.

Crude-oil prices were down 3% to around $90 a barrel. Fuel is generally among the biggest expenses for airlines and cruise-ship companies.

The S&P 500, though, closed up just 0.02% as the U.S. disputed a report from Iranian state media saying it had seen a draft framework to reopen the Strait of Hormuz, a gateway for around a fifth of the world's oil and natural-gas supplies.

The White House called that report a "complete fabrication" even as President Donald Trump in recent days has touted progress in negotiations.

Against that backdrop, some analysts this week have grown wary of the market's optimism.

"Markets have been optimistic for two months that hostilities with Iran ended with the ceasefire, but that optimism is misguided, as it has simply become a long stalemate with nearly all the ships still stranded in the Persian Gulf, and frequent false hopes of an imminent deal," Dennis Follmer, chief investment officer of Montis Financial, said in emailed commentary on Tuesday.

Rallies among travel stocks have come and gone since March, as signs of breakthroughs in negotiations to end the conflict give way to more fighting. Travel-industry executives have nonetheless been upbeat on demand, even as elevated oil prices cut into profits and higher airfares threaten to turn off travelers.

Jefferies analyst Sheila Kahyaoglu, in a note on Wednesday, said that global scheduled flights this week were down 1% on a year-over-year basis. Airfares in April, she noted, were up more than 20% from a year ago.

Macquarie strategist Thierry Wizman last month said that trusting any broader-market rally "requires trust in Trump alone."

"No other party in the conflict or peripheral to the conflict has been equally vocally confident in the prospect of peace through superior firepower," he said at the time.

-Bill Peters

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05-27-26 1840ET