Heathrow passenger numbers dropped 1.8% in June

Susannah Streeter, chief investment strategist at Wealth Club, said: “The resumption of attacks is hitting airline stocks, with IAG, the owner of British Airways, falling by more than two per cent and Wizz Air also lower.

“Airlines have come under pressure as investors assess the prospect of higher fuel costs and the potential for further disruption to flight schedules in the region.

“Heathrow has already provided a reminder of how the conflict is affecting passenger demand. The airport reported a 1.8 per cent fall in passenger numbers in June, with 7.2 million travellers passing through its four terminals, down from 7.4 million a year earlier.

“Heathrow said the decline reflected the “continued suppression of Middle East traffic” because of the conflict, although demand on transatlantic routes remained robust, with around two million passengers travelling between Heathrow and North America during the month.

“But with missiles landing once again across the Middle East there will be worries that the confidence of the travelling public will be dented yet again, just as there were hopes that flight patterns would start to get back to normal.

“US military forces hit dozens of sites in an attempt to wrest control of the Strait of Hormuz from Iran, and Tehran has retaliated by hitting US bases in the region.

“The war has underlined the huge importance of the waterway, which is so vital for shipments from the region. The Strait has become the United States’ Achilles’ heel in this conflict and Iran’s strongest bargaining chip.

“It’s a strategic chokepoint that gives Tehran disproportionate leverage despite America’s overwhelming military superiority.

“With the chance of negotiations seizing up again, and this fresh flare-up of attacks, it’s sent oil prices racing up four per cent above $79 a barrel.

“European and UK gas prices have also surged, back up to levels last seen a month ago. While prices are still not at crisis levels, the creep upwards will ignite fresh inflationary worries and concerns about how far higher interest rates could move.

“That’s being reflected in the bond markets, with yields on gilts and US Treasuries rising, demonstrating how investors are becoming increasingly skittish about how far central bank policy will have to move to keep a lid on inflation.”