Shares of Avis Budget Group (NASDAQ: CAR) surged by approximately 64.6% week-over-week, driven largely by recent geopolitical developments in the Middle East.

A significant factor behind the rally appears to be the stock’s high short interest. With roughly 20% of its float sold short, rising prices triggered a short squeeze, forcing bearish investors to quickly cover their positions and amplifying the upward momentum.

Beyond technical factors, macroeconomic conditions have also played a role. Ongoing uncertainty surrounding U.S.-Iran tensions and fragile peace negotiations has pushed global oil prices higher. This shift has indirectly benefited companies in the car rental and used vehicle sectors, including Avis Budget and Hertz, as consumers and businesses seek alternatives amid rising fuel costs.

From a financial perspective, Avis Budget has shown signs of improvement despite ongoing challenges. The company reduced its annual net loss by 51%, reporting a loss of $889 million compared to $1.82 billion the previous year. However, revenue slightly declined by 1.6% to $11.6 billion year-over-year.

In the fourth quarter, the company posted a net loss of $747 million, a notable improvement of 61.8% compared to the same period a year earlier. Quarterly revenue also saw a modest dip, falling 1.7% to $2.66 billion.

While Avis Budget’s recent stock performance highlights its potential for short-term gains—particularly in volatile market conditions—investors should remain aware of underlying risks. Some analysts suggest that certain AI-focused stocks may offer stronger long-term upside with potentially lower downside exposure, especially as trends like reshoring and policy shifts continue to shape the investment landscape.