Southwest Airlines Co (NYSE:LUV) is trading lower Friday afternoon as investors react to a sharp escalation in the U.S.–Israel–Iran conflict, fueling worries about jet-fuel costs and demand for discretionary air travel.

Here’s what investors need to know.

Middle East Strikes Escalate Tensions Overnight Thursday

Overnight Thursday, there were several strikes and missile incidents in the region. These included an Israeli strike on an underground bunker under Iran's supreme leader's compound in Tehran, Iranian drones and missiles aimed at the U.S. Al Udeid air base in Qatar and drones being intercepted over Saudi Arabia.

Governments in the region issued emergency alerts, and some airlines, such as Etihad Airways, were only slowly restarting limited flights.

Oil Price Fears Weigh On Southwest Airlines

For Southwest, the issue isn't direct exposure to Middle East routes because most of its flights are within the U.S., with a few nearby international routes. The bigger concern is how this new conflict could continue to push oil prices higher.

The closure of the Strait of Hormuz has already disrupted crude shipments and forced measures like a temporary waiver for India to buy stranded Russian oil, underscoring supply stress. Higher crude prices typically feed quickly into jet fuel, one of Southwest's largest operating expenses.

Fuel Spikes Challenge Southwest Low Cost Strategy

Southwest, which operates an all-Boeing 737 narrowbody fleet and targets price-sensitive leisure and small-business travelers, has limited ability to pass sudden fuel spikes through to customers without hurting demand.

At the same time, the intensifying conflict adds another macro shock for a company already managing wage inflation, fleet-delivery delays and a competitive domestic market.

LUV Stock Weakens But Holds Above 200 Day SMA

Southwest Airlines stock recently pulled back after approaching its yearly high near $54.80, with the latest decline pushing the price below its 20-day simple moving average (SMA). The drop also brought shares closer to the 50-day SMA, a key short-term support level traders watch for momentum shifts.

Despite the recent weakness tied to geopolitical tensions and fuel-cost concerns, LUV still remains above its longer-term 200-day SMA, indicating the broader uptrend has not yet fully broken.

LUV Shares Drop 6% Friday

LUV Price Action: Southwest Airlines shares were down 6.22% at $41.18 at the time of publication on Friday, according to Benzinga Pro data.

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