The period of April–July, popularly known as the summer travel season, in 2026, has unfortunately coincided with the ongoing Middle East conflict. While travel demand is high, so are air fares. The entire aviation industry is now looking at developments in the Persian Gulf (including the all-important Strait of Hormuz), as the route not only carries a significant share of the world’s jet fuel but also supplies crude oil to Asian refineries that, in turn, produce and export jet fuel globally.
As per the American Petroleum Institute’s estimates, about 40% to 60% of the crude oil that refineries in China, South Korea, and India imported and processed into jet fuel, and then exported to other markets, until the beginning of the Iran war, got transited through the Strait of Hormuz.
Since the beginning of the conflict in February, and blockade of the Strait of Hormuz by the United States and Iran, the bigger blowout was far more significant: Asian refiners losing a good chunk of the Gulf oil, resulting in production and export cuts of all sorts of fuel, including the one that powers commercial aviation.
According to the American Petroleum Institute, “Refineries process crude oil into a range of products — the big three are gasoline, which most of us put into our cars, motorcycles and small boats; diesel, which powers trucking, trains, ships and more; and jet fuel, which fuels jet aircraft and helicopters. But only about 11% of each barrel becomes jet fuel, and it’s generally difficult to increase that share. In the US, refineries have only been able to increase jet fuel production by roughly 2%-4%.”
Rumbling in the Aviation Sector
As of the middle week of May 2026, the surge in jet fuel prices from USD 85-90 to USD 150-200 per barrel has blindsided the aviation industry, with fuel alone accounting for up to a quarter of operating expenses, forcing airlines to raise fares, take a hit on their Q1 results, and revise their financial outlooks for the remainder of the year.
Some industry players are even mulling like letting go of their ‘non-technical’ roles. Cost cut, passing of fuel surcharge (variable fee applied by airlines to passenger tickets to offset volatile aviation turbine fuel ATF costs) to passengers, increasing baggage fees, and trimming benefits for economy passengers have emerged as part of the crisis-fighting mechanism for the industry.
According to the Washington-based research foundation Eno Center for Transportation: “Continued conflict and a re-closing of the Strait of Hormuz over the next three weeks will create shortages in jet fuel supplies for the start of the summer travel season.”
Impact of the shortened supply, including fare hikes and capacity reductions, are already being seen by travellers on South Asian airlines (which are most reliant on supplies from the Gulf region) and European airlines, who are calling on the European Commission for emergency action to address a potential shortage.
US airlines have begun to pass cost hikes onto consumers through increased checked bag fees and fare increases. A prolonged conflict will place airlines, particularly smaller carriers, in a more vulnerable financial position due to both a continued supply shortage, and a potential reduction in consumer demand.
As the Strait of Hormuz got blocked from March 2026 onwards, jet fuel prices increased 103%, with US jet fuel prices registering a hike from USD 2.50 a gallon to USD 4.88 a gallon from late February to early April.
“In early April, US jet fuel prices were around USD 205 per barrel. Jet fuel typically accounts for 25% to 30% of airline operating costs. For airlines, it is the second-largest expense after labour, and the most volatile component of their operations. Oil futures indicate that the market is anticipating a reduction in oil prices in May and June, but it is still unknown if a quick resolution will occur. While futures for May and June are lower than current prices, they are still elevated above the pre-war scenario, emphasising the already built-in impact from the first month of the conflict,” according to the Eno Center for Transportation.
As per industry executives, even if the Strait is reopened now, cost impact on jet fuel will persist due to reduced refining capacity in the Middle East. United Airlines anticipates prices to remain above USD 100 per barrel through the end of 2027.
However, the impact of the cost increase is not equal across geographies due to variation in dependency on jet fuel imports from the Middle East.
Asia-Pacific-based airlines were the worst-hit. While Korean Air has gone into ‘emergency management’ mode, Philippine Airlines has fuel till June-end. Most Asian airlines reduced schedules for April and May, apart from adding jet fuel surcharge to fares.
In Europe, there are concerns about a systemic jet fuel shortage in May and June for European airlines if the Hormuz stalemate continues. Industry group Airlines for Europe (A4E), an industry group representing European airlines, sent a letter to the European Union in April calling for emergency measures to respond to jet fuel shortages. The letter called for joint purchasing of kerosene, and a requirement for countries to maintain emergency jet fuel.
In 2022, in the initial days of the Russia-Ukraine war, the EU started joint purchasing of natural gas. European airlines are now calling for a return of the move.
Since 2022, European airlines have experienced jet fuel prices above the global average due to the Ukraine war (impact on access to Russian petroleum products), and due to the Israel-Gaza conflict (reduced capacity in the Red Sea for shipments from the Middle East and Southeast Asia).
Airports in Paris, Amsterdam, and Copenhagen have already started using their jet fuel reserves, and Italy has raised concerns about fuel shortage, and rationing at select airports.
The situation is a bit different in the United States. Airlines do not have a problem of supply. They have been affected by an increase in cost. Alaska Air, American Airlines, Delta Air Lines, and JetBlue Airways have announced increases to checked bag costs.
“Before the war, domestic airline prices increased 6% in January, and 7.1% in February. In the first week of the war (from February 28th to March 9th), US airline prices increased 24% in comparison to the same week in 2025. In comparison to European airlines, major US carriers do not hedge, a practice in which airlines purchase fuel supplies months in advance at a futures price. This may create more exposure for US airlines if the crisis continues,” according to the Eno Center for Transportation.
Stress upon budget carriers
The impact of fuel cost increases has varied impact on the business model and financial strength of various airlines. While legacy airlines, such as United, have the freedom to pass costs on to consumers with less concern about loss in consumer demand, the phenomenon has left low-cost airlines in deep soup.
Their operating costs are increasing, consumers are getting sensitive to price increases, and these airlines don’t have enough financial security to weather cost increases.
In April, JetBlue Airways became the first American airline to implement a price hike on checked baggage to offset blows from rising fuel cost. Delta Airlines CEO Ed Bastian said an increase in oil prices of just 1% per gallon would lead to more than USD 40 million in annual losses for the airline.
Michael O’Leary, CEO of Dublin-based budget carrier Ryanair (the largest airline in Europe by total passengers carried), which is known for its business model of offering rock-bottom prices on short flights between nearby European cities and then adding extra fees for things like baggage and seat selection, told The Guardian: “Nobody is willing to give us any assurances into June or July. But if there’s a risk to 10% or 20% of the fuel supply in June, July, or August, then we and all other airlines would have to start looking at cancelling some flights, or taking some capacity out.”
Despite the airline hedging (locking in prices using futures contracts) 80% of its fuel costs until March 2027 at USD 67 a barrel, O’Leary accepted the prolonged war bringing major market uncertainty and a situation in which Ryanair is ‘never in control of pricing’.
Then we have the example of Spirit Airlines. The discount carrier, on May 2, ceased operations after repeated attempts to secure creditor support for a government bailout plan met with failure.
The bigger picture here was not the USD 500 million financing package that would have kept the carrier afloat, but got stuck at the White House level. The hike in fuel prices on account of the Iran war put more pressure on the troubled carrier’s restructuring plan. By April-end, fresh financing was a must for survival of the business. And, the low-cost carrier failed in that task.