It's turning into a horrid day for the Australian share market and most ASX shares this Monday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has plunged by a horrendous 4.2% and is now under 8,500 points. If this continues, the ASX 200 is in for its worst day since the 2020 COVID crash. But let's talk about what's happening with Qantas Airways Ltd (ASX: QAN) shares.
Qantas shares are faring even worse than the broader market today. The ASX 200 airline and travel stock closed at $8.92 a share on Friday afternoon. But this morning, those same shares opened at just $8.11, an awful 9.08% down from where Qantas closed last week.
At the time of writing, the selling has eased, but Qantas remains down a nasty 5.7% at $8.41 a share.
So why are investors punishing the Flying Kangaroo so severely today, compared with the broader market?
Image source: Getty Images
Why are Qantas shares nosediving on Monday?
Unfortunately for Qantas shareholders, today's punishing sell-off of the airline's shares is probably due to the nature of the company. As an airliner, Qantas is one of the ASX 200's most sensitive stocks when it comes to oil prices. Fuel is the company's single-largest balance sheet cost. To illustrate, fuel costs for Qantas' 2025 financial year came in at $2.61 billion, making up more than a quarter of the company's total costs ($10.23 billion).
These fuel costs are directly tied to the global price of crude oil. Unfortunately for Qantas, oil has exploded higher over the weekend, thanks to the ongoing closure of the Strait of Hormuz, itself a consequence of the US-Iran War.
As we covered this morning, Brent crude was going for US$82 a barrel at the end of last week. Today, that same barrel is almost at US$110. That's the highest we've seen oil at since the spike caused by the Russian invasion of Ukraine in early 2022.
If the current situation in the Middle East continues to deteriorate, Qantas' fuel costs are set to skyrocket. That's at the same time that global flights are in chaos thanks to attacks on or near popular Middle East airports in Dubai, Doha, and other Gulf states.
So investors have a plethora of potential negative impacts on Qantas' business model to digest today. As such, it's not too surprising to see such a visceral reaction in the Qantas share price this session. Let's see how the rest of the week unfolds and how it impacts this ASX 200 travel stock.
