The US-Iran war has led to market volatility in the past two months, resulting in a global energy crisis, the impact of which is being felt across regions and sectors, including aviation. While UBS mentioned its concerns with regards to InterGlobe Aviation in light of the same, it is also of the view that it is better placed than its peers.
UBS, in its note, stated the global airline industry has witnessed heightened volatility with jet fuel spot prices nearly doubling and fuel supply concerns rising across several markets.
In contrast, the Indian government intervened to cap the increase in Aviation Turbine Fuel (ATF) prices for April 2026 at 9% from 115% increase in international prices in March 2026, it said.
Optimism about a potential ceasefire between the US and Iran has driven a 16% rebound in IndiGo's share price from the recent lows and stock is now trading 6% below the pre-conflict levels. The stock has also seen a sharp outperformance compared to all major global airline peers during the conflict, UBS said.
The brokerage is of the view that the outperformance is increasingly stretched, given IndiGo's relatively higher earnings pressure from high crude prices and due to adverse currency movements even as the government's support in India is largely aimed at protecting weaker airlines.
UBS said with jet fuel prices remain high at around $200/bbl, and with no clear signs of a de-escalation in West Asia, the situation is an extended disruption rather than a temporary shock.
Therefore, the brokerage has increased its fuel cost assumptions for financial year 2027 and financial year 2028 by 28% and 30%, respectively, based on the jet fuel forward curve and UBS' outlook on the USD-INR.
27/04/2026 Shloka Badkar/CNBC TV18
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