The airline and tourism industries were looking for clues and struggling to contain the fallout from the escalating U.S.-Israeli war on Iran as governments worked on bringing tens of thousands of citizens stranded across the region to their home countries.
A handful of repatriation flights were due to take off from the Middle East on Wednesday, while the selloff in global airline shares eased even as the U.S. and Israeli air war against Iran continued unabated.
The airspace over most of the Middle East remained largely empty early on Wednesday, with major Gulf hubs, including Dubai, the world's busiest international airport, remaining shut for a fifth day, in the biggest travel crisis since the COVID-19 pandemic.
A Reuters report, citing online tracker data, indicated on Tuesday that the conflict in the Middle East resulted in more than 20,000 flights being canceled in recent days.
Airports in Dubai and Doha, both serving as major connecting points in the Gulf, handling hundreds of flights between East and West daily, were among those impacted by attacks on Tehran and its retaliatory actions.
The attacks have upended travel across a growing region with several thriving business hubs that are trying to diversify away from oil-dominated economies. The turmoil also narrows an already-slim flight corridor for long-haul flights between Europe and Asia, complicating operations for global air carriers.
Stranded travelers across the Gulf rushed to secure seats on a limited number of repatriation flights as governments moved to bring passengers home, even as explosions tore through Tehran, Beirut and several other locations across the wider region.
The first repatriation flights were due to leave for Britain and France on Wednesday, and the United Arab Emirates (UAE) opened special corridors to allow some citizens to return home.
This contrasts with the thousands of flights that take off in the region normally. Marooned tourists and some expatriates have also tried to find their own way out.
Airline shares, however, were less volatile on Wednesday after double-digit percentage drops in the past few days, wiping tens of billions of dollars from airlines' market value.
Lufthansa was up 1.7% at 10:13 a.m. GMT, while Qantas was 2.7% lower. Both have lost more than 10% of their value this week so far, their worst week in almost a year.
"It's pretty well the biggest shutdown we've seen certainly since the COVID pandemic," said Paul Charles, CEO of luxury travel consultancy PC Agency, adding that beyond passenger disruption, the cargo impact would run to "billions of dollars."
Middle East tourism, worth some $367 billion annually to the region, is also taking a hit from the widening conflict, putting at risk the region's carefully constructed image as a safe and high-end vacation hot spot after billions in investment in recent years from Abu Dhabi to Dubai.
Demand for alternatives to Gulf airlines has surged, with bookings and ticket prices jumping on routes like Hong Kong-London, Reuters' checks showed on Tuesday. Should the conflict drag on, it could cost the Middle East billions in tourism dollars, analysts estimate.
"We can't get home, we can't go back to work, we can't get the kids back to school," said Tatiana Leclerc, a French tourist stuck in Thailand, whose flight had been set to go via the Middle East hubs that are a key link between Asia and Europe.
Between 23 million and 38 million fewer people could travel to the Middle East this year versus the expected numbers, depending on the duration of the conflict, consultancy Tourism Economics said.
"This includes expected lingering sentiment impacts beyond the immediate conflict period," the consultancy's Helen McDermott and Jessie Smith wrote in a note, pegging the potential loss in visitor spend at some $34 billion to $56 billion.
"There's a big collapse in bookings to the Middle East," Michael O'Leary, CEO of budget carrier Ryanair, told reporters on Tuesday, adding the fallout had driven a surge in demand for short‑haul flights to places like Portugal, Italy and Greece ahead of the Easter holiday period.
Still, he noted the Middle East has historically rebounded from bouts of regional instability.
"I suspect it won't go on long and therefore I suspect it won't have any long-term trends, but I think there's no doubt that it has undermined confidence in air travel to the Gulf."
Dubai's tourism office said in a statement on Tuesday that visitor safety was its highest priority and hotels had been asked to support affected guests, citing the city’s experience managing "periods of global disruption."
Asian airline stocks were also hurt, but some pared losses from earlier this week. Korean Air Lines shares fell 7.9%, after dropping 10.3% on Tuesday.
"It is just a different market reaction time as many European airlines have already reacted more since the war started," said Gary Ng, a senior economist at Natixis.
"As the market prices in a longer-duration war with higher energy prices and weaker currencies, it affects the whole sector broadly, including APAC airlines."
South Korea's stock market was closed on Monday when most airline and travel stocks bore the brunt of the impact from the conflict.
Japan Airlines' stock fell 2.9% on Wednesday, after losses of 6.4% on Tuesday.
Major Chinese carriers Air China and China Southern Airlines closed down between 1% and 3%.
Oil prices have risen sharply this week, with Brent crude oil up around 14% since the U.S.-Israeli strikes on Iran, potentially pushing up fuel costs for airlines.
Asian markets, in particular, faced the brunt of oil supply shock concerns due to the region's heavy reliance on imports shipped through the Strait of Hormuz, which has been halted by Iran.
South Korean stocks sank 12.1%, posting the biggest drop in their 46-year history on Wednesday.
