Strait of Hormuz reopening cuts oil 20% as airline stocks recover

WTI crude has tumbled more than 20% over the past month to around $75 a barrel after the U.S. and Iran signed a memorandum of understanding reopening the Strait of Hormuz, a chokepoint handling about 21% of global oil trade.

"The speed of the oil price decline has been remarkable, but the normalization process is far from linear," said Elena Fischer, geopolitical risk analyst at Edgen. "The MOU kicks off a 60-day negotiation window, and any breakdown in talks could quickly reverse the supply glut."

WTI had surged to nearly $113 a barrel in April after the conflict disrupted tanker traffic through the waterway. Prices had already fallen from those highs before the deal, as strategic inventory releases, a collapse in demand from top buyer China, and tankers sneaking "dark" out of the Persian Gulf contributed to a small oversupply in key markets, traders told Bloomberg. The U.S. Global Jets ETF now trades above its pre-conflict level, and Delta Air Lines shares hit an all-time high last week.

The 60-day negotiation period means the reopening remains fragile. Trump has already called any Iranian toll charges on Hormuz passage "unacceptable," and talks are set to resume next week. For airlines, lower jet fuel costs could improve margins in the coming quarters, but the sector's high fixed costs and cyclical nature mean investors should focus on individual carriers' fundamentals rather than the geopolitical tailwind.

Delta vs. American: Two Divergent Paths

Delta Air Lines has proven the most resilient U.S. carrier during the conflict. Its stock is up more than 21% year to date and reached an all-time high last week after announcing a 15% quarterly dividend increase. The airline owns an oil refinery in Pennsylvania, which helped offset the worst of the higher jet fuel costs during the crisis. Delta generated more than 60% of its first-quarter revenue from premium and corporate customers, a segment that continued traveling even as prices rose. Q1 2026 revenue reached $14.2 billion, up almost 10% year over year, though the carrier posted a net loss of $289 million for the quarter.

American Airlines presents a different picture. The carrier is pursuing a turnaround strategy focused on increasing its corporate and premium share while improving flight reliability. Its Q1 2026 revenue rose almost 11% year over year to $13.9 billion, but its net loss was higher at $382 million. American's heavy debt burden — $34.7 billion at the end of Q1, the first time under $35 billion since 2015 — limits its flexibility compared with Delta's $13.5 billion in total debt. American has underperformed industry peers this year, which could present an opportunity if its strategic changes gain traction.

What Comes Next

The last time a major Middle Eastern chokepoint faced disruption — the 2019 attacks on Saudi Aramco's Abqaiq facility — oil prices spiked 15% in a single day but reversed those gains within two weeks as supply normalized. The current situation carries more complexity: damage to key infrastructure could take months or years to repair, and the 60-day negotiation period leaves the door open for renewed restrictions if violence restarts. For now, the market is pricing in continued normalization, but the risk of a reversal remains embedded in options pricing.

This article is for informational purposes only and does not constitute investment advice.