JPMorgan has released a research report stating that Chinese airlines are entering their strongest supply-demand dynamic in over a decade. A shortage of aircraft deliveries is constraining capacity growth for 2026-2027, maintaining it at approximately 3% to 4%, while industry-wide load factors reached a record high in the fourth quarter of last year. However, conflict between Iran and the US has emerged as the dominant short-term risk. Brent crude oil has surged approximately 50% to $115 per barrel, and Chinese carriers are fully unhedged, with fuel constituting about one-third of their operating costs. The bank's base case forecasts an oil price of $80 per barrel for 2026-2027, which would likely result in the three major mainland airlines recording losses or operating near breakeven in 2026. The report notes that sector share prices have already adjusted roughly 30% due to geopolitical tensions. Until there is greater clarity on the oil price outlook, the bank maintains a cautious view on the sector. It upgraded AIR CHINA (00753) from "Underweight" to "Neutral," raising its target price from HK$4.5 to HK$4.8. Conversely, it downgraded CHINA EAST AIR (00670) from "Neutral" to "Underweight," lowering its H-share target from HK$3.0 to HK$2.7. CHINA SOUTH AIR (01055) retains an "Underweight" rating, with its H-share target price adjusted down from HK$2.9 to HK$2.8.