Airlines on the Brink: How the Iran War's Oil Shock Is Threatening the Global Aviation Industry
Jet fuel costs have doubled since the conflict began on February 28, more than 40,000 Middle East flights have been canceled, and airline CEOs are warning that some carriers may not survive the oil price shock.
The Fuel Math Doesn't Work
Airline economics depend on thin margins and predictable fuel costs. The war in the Middle East shattered both. Since the conflict began on February 28, Brent crude oil prices jumped as much as 29% to above $105 per barrel by March 9 — hitting levels not seen since 2022 — according to Reuters. Jet fuel prices have roughly doubled since the start of the conflict, according to the same report.
Fuel is the second-largest expense for air carriers after labor, typically accounting for a fifth to a quarter of operating expenses, per Reuters. That ratio grew dramatically as oil prices surged. The effect is compounded by airspace restrictions that force pilots to reroute around the conflict zone, requiring aircraft to carry extra fuel and make additional refueling stops. Longer routes add crew costs and reduce schedule efficiency.
At Los Angeles International Airport, Type A jet fuel was priced at $12.72 per gallon as of late March, compared to $9.73 at Denver International Airport and $11.73 at Miami International Airport, according to Atlantic Aviation price data cited by the Los Angeles Times. The West Coast is isolated from oil pipeline networks, making it especially vulnerable to supply disruptions, United Airlines CEO Scott Kirby said in an LA Times interview.
Canceled Flights and Route Collapses
More than 40,000 flights to and from the Middle East were canceled in the first 10 days of the conflict, from February 28 through March 9, according to data from aviation analytics firm Cirium cited by Reuters. Emirates, Qatar Airways, and Etihad — the three Gulf carriers that together normally transport roughly one-third of passengers flying between Europe and Asia, and more than half of all Europe-to-Australia and Pacific Island passengers, per Cirium — suspended or sharply curtailed operations.
Turkish airlines including Turkish Airlines, AJet, Pegasus, and SunExpress canceled flights to Iraq, Syria, Lebanon, and Jordan, Turkish Transport Minister Abdulkadir Uraloglu confirmed, per Reuters. Airlines across Asia and Europe scrambled to find alternate routes, adding hours to long-haul journeys.
The rerouting created cascading cost pressure. "If crude is rising 20%, jet fuel is rising several times more as it is even more scarce, adding significant cost to operations together with crew resources, which are stretched due to longer flying times when airspace is closed," said Subhas Menon, head of the Association of Asia Pacific Airlines, in comments reported by Reuters.
Airfares Surge to Extreme Levels
Consumers bore immediate consequences at the ticket counter. Direct flights from Seoul to London on March 11 via Korean Air Lines — with first class now the cheapest available seat — leapt to $4,359, up from $564 a week earlier, according to Google Flights data cited by Reuters. Flights from Los Angeles to Lima on LATAM Airlines rose to $2,125 from $499 in the same period, per Reuters.
A one-way trip from Newark to Quebec City on Air Canada nearly tripled to $1,499 compared to the prior week, according to Google Flights data cited by Reuters. The fare increases reflected both higher fuel costs and airlines eliminating low-cost seat classes on routes that had become financially unviable at current fuel prices.
United Airlines CEO Scott Kirby warned that airfares could increase by as much as 20% and that United could face an $11 billion loss if oil prices remained at current levels, he said in remarks reported by the Los Angeles Times. "Just like the gas stations have, we'll have to adjust pricing to reflect our cost of fuel," Kirby said, as quoted by the LA Times.
Analysts Warn of Industry Casualties
Deutsche Bank analysts warned in a note to clients, cited by Reuters, that "absent near-term relief, airlines around the world could be forced to ground thousands of aircraft while some of the industry's financially weakest carriers could halt operations." The note drew a comparison to 2005, when jet fuel cost spikes following hurricanes Katrina and Rita contributed to Delta and Northwest Airlines filing for Chapter 11 bankruptcy, according to Reuters.
Lorraine Tan, director of equity research for Asia at Morningstar, told Reuters that "the issue for the airlines now is that travel demand may be curtailed as costs become prohibitive for leisure travellers and as some companies start to limit business travel due to the uncertain outlook." She added that the impact of high airfares could limit travel demand for much of 2026.
Budget carriers face the steepest risk. Spirit Airlines, the low-cost carrier that filed for its second bankruptcy in 2025 and cut several routes in early March 2026, illustrates the fragility of thin-margin operators, according to the LA Times. "They're less resilient to these types of challenges," said Alan Fyall, associate dean of the University of Central Florida Rosen College of Hospitality Management, in comments to the LA Times. United CEO Kirby put it more bluntly: "If these other guys make the same mistakes they made six years ago, and if the forecast about $175 per barrel is right, you'll see airlines not survive," he said, as quoted by the LA Times.
Hedging Divides the Industry
Major Asian and European airlines have oil hedging in place that provides some insulation, but U.S. airlines largely stopped hedging fuel costs over the last two decades, according to Reuters. The absence of hedging exposes American carriers to the full force of the price spike.
Tom Fitzgerald, TD Cowen vice president of equity research covering six major U.S. airlines and Air Canada, told Reuters: "We assume the airlines are able to recapture a portion of the spike in fuel prices, but it's hard to envision margin expansion this year barring a rapid decline in energy prices."
United's Chief Commercial Officer Andrew Nocella said the company had prepared for industry shocks. "We've prepared for shocks to our industry, because they occur on a regular basis," Nocella said in remarks reported by the LA Times. Airlines that do hedge fuel are better positioned, but hedges eventually expire, and if the conflict persists into summer travel season — traditionally the industry's most profitable period — even hedged carriers will face exposure.
Cascading Consumer Effects
The airline crisis radiates outward. Higher fares reduce discretionary travel spending. Some routes in smaller California markets — including hubs in San José and Burbank — could become unavailable as airlines consolidate operations to save money, according to the LA Times. "Airlines will refuel where they can, at the cheapest source," said Fyall, as quoted by the LA Times, meaning carriers will seek to avoid expensive West Coast fuel when possible.
Airline share prices have reflected the turmoil. On March 9, Korean Air Lines fell 8.6%, Air New Zealand dropped 7.8%, and Cathay Pacific declined 5%, per Reuters. Air France KLM, British Airways parent IAG, Wizz Air, and Lufthansa fell between 2.5% and 6% in European trading that day. Major U.S. airlines saw shares fall 1% to 5%, with JetBlue down 5.35% and American Airlines down 3.44%, per Reuters.
The longer the conflict continues, the more pressure accumulates on an industry with little capacity to absorb extended disruption. With oil currently trading around $100 per barrel and ceasefire talks ongoing without resolution, analysts say the aviation sector faces a difficult summer regardless of outcome — the financial damage of the first five weeks alone has already reset the industry's 2026 trajectory.