Shares of InterGlobe Aviation Ltd (IndiGo) fell the most among Nifty50 constituents on Monday, sliding more than 6% amid a broader market sell-off triggered by tensions in West Asia. Beyond the spike in crude oil prices, airport closures across the region, leading to widespread flight cancellations, are set to weigh on the airline’s operations.
Indian markets are closed on Tuesday for a public holiday.
Brent crude, which hovered around $60 a barrel in early January, climbed to $72 by 25 February on expectations of military action against Iran. Since the conflict began, prices have surged to about $78. The risk could intensify if shipping through the Strait of Hormuz, a conduit for roughly 20% of global oil flows, faces extended disruption.
Higher fuel costs have a direct bearing on profitability. According to JM Financial Institutional Securities, IndiGo’s earnings would contract by about 13% for every $5-a-barrel increase in Brent prices, assuming a stable rupee.
Pressure is already building. Domestic oil marketing companies raised aviation turbine fuel prices by 6% month-on-month in March, a move that will affect fourth-quarter (Q4FY26) earnings. Currency volatility compounds the risk. IndiGo’s management has previously indicated that every one-rupee depreciation against the US dollar increases costs by about ₹900 crore due to its forex exposure.
Operationally, the airline is grappling with significant disruption from airport closures in West Asia, with international routes accounting for nearly 30% of its total capacity. IndiGo reportedly cancelled about 200 international flights on 2 March, close to 10% of its daily operations.
The setback comes just as the airline was regaining its footing after severe disruption in December, when a pilot shortage led to widespread cancellations and delays. IndiGo recovered lost market share, gaining 400 basis points month-on-month to 63.6% in January, in line with November levels, according to data from the Directorate General of Civil Aviation. Even so, this remains about 160 basis points below the January 2025 peak, which was buoyed by Maha Kumbh-related travel.
The stock is down about 23% from end-November levels and trades at 22.5 times estimated FY27 earnings, based on Bloomberg data.
“A swift de-escalation would likely see operations and bookings normalize quickly, but a prolonged disruption risks capacity rationalization, margin compression, and estimate downgrades,” said the JM Financial report dated 1 March. It described the situation as tactically negative in the near term, with the duration of airspace restrictions and the trajectory of crude prices likely to determine the stock’s direction.