HK Stock Market Move | Middle East situation repeatedly disrupts oil prices. China Eastern Airlines (00670) drops nearly 4%. Air China Limited (00753) drops more than 3%.

Airline stocks collectively fell, as of the time of writing, China Eastern Airlines (00670) fell 3.79% to HK$3.55; Air China Limited (00753) fell 3.35% to HK$4.62; China Southern Airlines (01055) fell 2.09% to HK$3.74. On the news front, due to escalating concerns about tensions in the Middle East, US oil rose more than 2% this morning. According to CCTV News reporters on June 3rd local time, the Iranian Islamic Revolutionary Guard Corps stated that the US Fifth Fleet headquarters was attacked by Iranian Revolutionary Guard Corps air and space missile and drone. The US Navy Fifth Fleet headquarters is located in Bahrain. Of note, domestic airline fuel surcharges were lowered for the first time this year in June, with surcharges on routes over 800 kilometers reduced from 170 yuan to 150 yuan, and routes under 800 kilometers reduced from 90 yuan to 80 yuan. Caitong believes that the high growth in airline performance in Q1 2026 has preliminarily validated the profitability under the improvement in supply and demand. Although high oil prices have short-term impacts on operations, the long-term industry improvement in supply and demand remains unchanged, and the sector is expected to see an increase in business cyclicality from the bottom up.