The aviation industry has spent the past three years rebuilding from the pandemic era: restoring capacity, repairing balance sheets and managing persistent supply-chain disruption. Now it faces another external shock; a renewed surge in global fuel prices linked to escalating tensions involving Iran and growing instability across the Middle East.
As of May 2026, oil markets remain highly volatile. Brent crude has repeatedly traded close to or above the US$100-per-barrel mark, while jet-fuel prices have climbed sharply compared with historical averages. For aviation, the implications are immediate. Fuel typically accounts for 25–35% of an airline’s operating costs, and for some low-cost and ACMI operators the proportion can be even higher.
The result is a rapidly changing operating environment affecting airlines, wet-lease specialists, cargo carriers, business aviation operators and MRO providers.
Why the Iran Conflict Matters
The current disruption is not simply about higher oil prices. It is about the fragility of global energy logistics.
At the centre of the issue is the Strait of Hormuz, one of the world’s most strategically important maritime chokepoints. Roughly one fifth of global oil trade normally passes through the strait, including refined products used heavily by aviation markets in Europe and Asia.
Since the escalation of the Iran conflict, tanker traffic has faced growing disruption from security threats, naval activity, insurance-risk premiums and operational uncertainty. Markets are pricing not only physical supply risk, but also geopolitical instability itself.
Refinery constraints have added further pressure. Aviation depends heavily on middle distillates, and reduced refinery throughput in parts of the Gulf and Asia has tightened jet-fuel supply even more. Sanctions on Iranian crude exports continue to limit market flexibility at a time when spare capacity is already under pressure.
This volatility has been reflected clearly in benchmark pricing:
- Brent crude has fluctuated between roughly US$95 and US$120 per barrel.
- West Texas Intermediate (WTI) has traded in the US$90–105 range.
- Jet-fuel spot prices in some markets have exceeded US$160 per barrel.
- Crack spreads for aviation fuel have widened significantly compared with more stable post-pandemic trading conditions.
Historically, jet fuel averaged closer to US$80–100 per barrel during calmer market periods. The current environment therefore represents a major cost shock for operators.
Commercial Airlines Face Renewed Margin Pressure
For network airlines, fuel volatility is once again dominating financial planning.
Several European and Asian carriers have already adjusted schedules, reduced weaker frequencies and increased fares. Lufthansa Group has trimmed parts of its network as operating costs continue to rise, while other airlines are focusing capacity on stronger long-haul and premium markets.
Fuel hedging remains a major differentiator. Ryanair and Southwest Airlines have historically benefited from disciplined hedging strategies during periods of oil volatility, whereas carriers with limited hedge protection are exposed much more directly to spot-market pricing.
The challenge is particularly acute for airlines still carrying elevated debt from the pandemic recovery period. Fuel inflation can erode margins quickly, especially on long-haul sectors where fuel burn remains substantial despite newer-generation aircraft.
Many airlines are responding through:
- fuel surcharges,
- tighter capacity discipline,
- reduced frequencies on marginal routes,
- accelerated retirement of older aircraft,
- and greater focus on load factors and yield management.
Older widebody fleets such as early Boeing 777s and Airbus A330 variants become significantly less attractive when fuel prices spike.
ACMI and Wet-Lease Operators See Opportunity Alongside Risk
The ACMI and wet-lease sector is experiencing a more complex picture.
On one hand, operators face sharply higher operating costs. Fuel pass-through clauses provide some protection, but volatility still affects cash flow, planning and contract negotiations.
On the other hand, disruption creates opportunity.
As airlines cut schedules, manage fleet shortages or seek short-term operational resilience, demand for wet-lease capacity rises. More financially stable ACMI operators with strong contractual coverage and disciplined fleet strategies remain better positioned to benefit from disruption-driven demand
Emergency wet-lease demand is also being driven by continued supply-chain delays affecting aircraft deliveries and engine maintenance turnaround times.
The ACMI sector is experiencing both opportunity and stress. While disruption can increase emergency wet-lease demand, recent failures including SmartLynx and the collapse of Ascend Airways illustrate how exposed weaker operators remain to fuel volatility, financing pressure and fluctuating airline demand
Cargo Operators and Supply Chains Under Pressure
Air cargo carriers are also feeling the effects.
Higher jet-fuel costs directly affect yields, while disruption to Gulf shipping routes is pushing some time-sensitive freight back towards air transport. This creates a difficult balance: stronger cargo demand supports revenues, but elevated fuel costs reduce profitability.
Large operators such as FedEx and UPS have historically responded with fuel surcharges and network optimisation. Smaller cargo specialists have less pricing power and remain more exposed.
The wider economic impact is significant. Rising transportation costs feed inflation across manufacturing, pharmaceuticals, electronics and aerospace supply chains.
Low-Cost Carriers and Business Aviation
Low-cost carriers are particularly exposed because fuel represents a larger share of their operating model.
Although some LCCs maintain efficient fleets and strong ancillary revenues, ultra-low fare models become harder to sustain when fuel prices remain elevated for extended periods. This could accelerate consolidation and place additional pressure on weaker regional carriers.
Business aviation is experiencing mixed effects. Demand among corporate and high-net-worth travelers remains relatively resilient, but charter pricing has risen sharply as operators pass on fuel costs.
Long-range missions in particular have become materially more expensive compared with early 2025 levels.
MRO Planning Shifts Towards Efficiency
For MRO providers, the fuel environment is creating both uncertainty and opportunity.
Higher fuel prices often encourage airlines to defer non-essential flying while accelerating investments linked to efficiency and reliability. Engine performance upgrades, fuel-burn optimisation and predictive maintenance programs become commercially more attractive.
At the same time, spare-parts logistics and maintenance supply chains continue to face pressure from higher transportation and energy costs.
The result is growing emphasis on:
- engine optimisation,
- weight-reduction modifications,
- improved fleet utilisation,
- and support for newer-generation aircraft.
What Happens Next?
The next six to twelve months will depend largely on four variables.
Escalation or De-escalation
If tensions ease and shipping through the Strait of Hormuz stabilises, Brent crude could return towards the US$80–90 range later in 2026.
However, further military escalation or sustained disruption could push prices significantly higher again.
OPEC Decisions
Additional supply from OPEC producers (Saudi Arabia, Iran, Iraq, UAE, Kuwait, Venezuela) could moderate prices, but spare capacity remains politically sensitive and finite. Markets are watching Saudi Arabia and Gulf producers closely.
Global Economic Slowdown
High fuel prices eventually weaken demand. If global economic growth slows sharply, oil prices may soften, but airline profitability could still deteriorate because passenger demand would also weaken.
SAF and Structural Change
The current crisis may accelerate investment in Sustainable Aviation Fuel and broader efficiency initiatives.
SAF cannot yet replace conventional jet fuel at scale, but today’s volatility reinforces the strategic importance of reducing exposure to geopolitically vulnerable fossil-fuel supply chains.
Airlines, lessors and OEMs are likely to place even greater emphasis on fuel-efficient fleets, operational optimisation and next-generation propulsion technologies.
Conclusion
The Iran conflict has exposed how dependent global aviation remains on fragile energy supply chains and geopolitical chokepoints.
Rising jet-fuel prices are already affecting airline profitability, network planning, cargo economics, ACMI demand and MRO strategy across Europe and the wider global market.
Yet the industry is also proving more resilient than in previous crises. Airlines have stronger pricing discipline, more sophisticated hedging strategies and greater operational flexibility than they did a decade ago.
Volatility is likely to remain the defining theme for the remainder of 2026. Operators that combine financial discipline, efficient fleets, agile network planning and robust fuel-risk management will be best positioned to navigate the turbulence ahead.
