Aviation stocks are experiencing a broad-based rebound. At the time of writing, CHINA EAST AIR (00670) shares rose 5.73% to HK$3.32, AIR CHINA (00753) shares gained 4.76% to HK$4.40, CHINA SOUTH AIR (01055) shares increased 4.09% to HK$3.56, and CATHAY PAC AIR (00293) shares advanced 1.72% to HK$11.84.

The catalyst for this movement is a sharp decline in international oil prices following news that the US President called off planned airstrikes on Iran and indicated that multi-party negotiations on the issue had received preliminary approval. This development is expected to significantly alleviate cost pressures on airlines.

The International Air Transport Association (IATA) had previously forecast that global airline fuel costs would rise to $350 billion in 2026 from $252 billion in 2025.

In a related development, a research report from Guotai Junan Securities noted that China's domestic aviation fuel price in June was cut by 15%, aligning with their expectations. The report also highlighted that the coverage ratio of domestic fuel surcharges relative to oil prices improved in June compared to May.

With the peak summer travel season's advance bookings yet to commence, the report suggests that once the season kicks off after the conclusion of national exams, the combination of seasonal demand and lower oil prices is expected to enhance airlines' ability to pass on fuel costs through surcharges. The current high oil price environment and off-peak season conditions are seen as presenting a counter-cyclical opportunity for the sector.