Up 19% in a week: Why is everyone suddenly buying Virgin Australia shares?

Virgin Australia Holdings Ltd (ASX: VGN) shares closed at $2.85 on Friday afternoon. That's around 19% higher than the ASX airline stock's $2.40 opening price on Monday the same week.

The latest share price also represents a 20% rebound from a low in late-October. 

But after a bumpy ride this year, with multiple peaks and troughs, there's still some way to go before they've recovered back to early-2026 highs. The stock is still down around 18% for the year-to-date.

Why is everyone buying Virgin Australia shares?

There wasn't any price sensitive news out of the company last week to explain the latest rally, which means it's most likely the result of a shift in market sentiment and a tumbling oil price.

The largest operating cost for Virgin Australia is its jet fuel, which is refined from crude oil. Given Australia imports more than 90% of its refined fuel, its local prices are closely tied to global oil prices and currency movements. 

Lower global oil prices ease operating costs for the airline, which in turn lowers pressure on profits. 

Global oil prices fell around 13% over the course of last week. 

According to Trading Economics data, crude oil cooled around 8% to around US$88 per barrel on Wednesday, extending losses for the third day in a row and hitting a one-month low. The price climbed a little higher to around US$90 per barrel  by the end of the week.

Markets started to price in an end to the Iran war after the White House linked Republicans' midterm election defeat to the war.

But, investors are concerned that the end of the US midterm elections could pave the way for renewed action against Iran, potentially threatening Middle East oil supplies. 

Trading Economics said:

"Iran reported attacks on oil tankers in the Strait of Hormuz on Thursday, while UKMTO data indicated vessel attacks were continuing at a near-record rate. Hopes for a diplomatic resolution emerged after Iran reportedly sent a nuclear proposal to Washington through Qatar."

What's next for the airline's shares?

If conflict cools in the Middle East and oil prices continue tumbling, it could create a great tailwind for Virgin Australia.

The business has already proven its business is growing quickly, and posted an impressive FY26 result in August.

The airline announced a 13.4% rise in underlying EBIT and 21.9% increase in underlying NPAT for FY26. It also announced its first fully-franked dividend of 7.6 cents per share since re-listing.

The airline finished FY26 with a conservative balance sheet. It's net debt, at $1.2 billion, represents a leverage ratio below its target range and available liquidity is $1.6 billion.

Looking ahead, Virgin Australia said it expects continued strong travel demand to support earnings. For the first half of FY27, underlying EBIT is forecast to be broadly in line with the prior period.

The company is also planning to grow its owned fleet and maintain financial discipline, targeting capex of $0.9–1.0 billion in FY27. 

Are Virgin Australia shares a buy, sell, or hold? Here's what the experts think

The outlook for Virgin Australia shares is incredibly bullish. 

According to TradingView data, the majority of analysts (10 out of 11) have a buy/strong buy rating on the travel shares. The average $3.58 target price implies a potential upside of around 26% over the next 12 months.

The post Up 19% in a week: Why is everyone suddenly buying Virgin Australia shares? appeared first on The Motley Fool Australia.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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