HK Stock Market Move | Trump's speech caused oil prices to rise. Both China Eastern Airlines (00670) and China Southern Airlines (01055) fell more than 4%.

Aviation stocks collectively fell. As of the time of writing, China Eastern Airlines (00670) fell by 4.6% to HK$3.73; China Southern Airlines (01055) fell by 4.02% to HK$4.06; Air China Limited (00753) fell by 3.01% to HK$4.83; CATHAY PAC AIR (00293) fell by 2.56% to HK$11.44. On the news front, U.S. President Trump made a televised speech this morning on the situation in the Middle East, warning that the U.S. will launch a severe strike against Iran within the next two to three weeks. He even threatened to bomb local power plants if an agreement is not reached. His tough rhetoric has dampened market hopes for a quick end to the war. As a result, international oil prices have surged, with WTI crude oil rising by over 4% to $104.35 per barrel and Brent crude oil up nearly 5% to $106.195 per barrel. Haitong Securities pointed out that fuel costs account for about 35% of airlines' total costs, and the impact on profits can be significant. The actual impact depends on supply and demand dynamics. Chinese airlines have entered a period of low supply growth, and demand will benefit from a boost in consumer spending. Continued improvement in supply and demand dynamics will help mitigate the impact of rising oil prices. Domestically, fuel surcharges will cover a large percentage of the increase in oil prices, and continued improvement in supply and demand dynamics will help transmit this impact. Internationally, due to the significant impact of the Middle East conflict on hubs like Dubai and Doha, flights between China and Europe will benefit from increased domestic and international transit flows, leading to higher ticket prices that will partially offset the rise in oil prices.