Jet fuel prices have roughly doubled since the start of the war in Iran, rising even faster than gasoline and diesel. Airlines worldwide are responding by cutting routes, raising fares, adding fuel surcharges and increasing baggage fees.
Asia has been hit particularly hard: some countries are rationing fuel and restricting exports to cope with the supply shock. “This is an Asian crisis,” says George Shaw, an analyst at trade analytics firm Kpler. In Europe, Airports Council International Europe warned the European Commission that if significant, stable passage through the Strait of Hormuz doesn’t resume soon, a systemic jet fuel shortage could become a reality — though some analysts think shortages would take longer to materialize.
Why supplies are so squeezed
Ship traffic through the Strait of Hormuz is at a trickle, and that disruption affects jet fuel in two ways. First, many refineries in the Persian Gulf produce finished jet fuel for export; the shipping disruption keeps that product from reaching markets. Second, crude oil from the Gulf — the feedstock for refineries worldwide — is also being blocked, hampering production elsewhere. That double hit — on finished fuel and on crude supplies — is driving prices higher.
The impact is stark: the world’s three top jet fuel suppliers are effectively constrained. China has banned jet fuel exports, South Korea has reduced production because it lacks enough crude, and Kuwait can produce fuel but faces logistical barriers to exporting it. In other words, the three largest global suppliers have been knocked out simultaneously.
Even the U.S. feels the effects
Although the U.S. is the world’s largest oil producer and a net exporter of jet fuel, it remains tied into global trade flows. California, for example, has long imported some jet fuel from Asia. Domestic refinery closures in the state, combined with supply shifts, make it harder to move Gulf Coast fuel to the West Coast; shipping via Panama Canal or longer domestic moves can be more expensive than importing from Asia. That means shortages or price pressure on the U.S. West Coast are possible if overseas suppliers can’t deliver.
Airlines’ finances and responses
Many U.S. carriers largely abandoned fuel hedging in recent years; when prices fell hedges cost money, so airlines decided the practice wasn’t worth it. That leaves them exposed when prices spike. Delta Airlines recently told investors higher fuel prices could cost the company an extra $2 billion this quarter. Delta is comparatively better positioned because it owns a refinery, but the bill for the industry overall is large.
Airlines are reacting by cutting unprofitable flights and routes and passing some costs to customers through higher fares and surcharges. Delta’s CEO said the carrier is trimming service where it doesn’t make sense and recapturing higher costs through price increases; demand, he said, remains resilient.
How long prices may stay high
Even if the Strait of Hormuz reopened tomorrow, relief would take weeks. Oil fields and refineries that were shut have to be restarted, a process that can be slow and expensive — and in some cases facilities have been damaged. Rystad Energy has estimated substantial damage to oil and gas infrastructure in the Middle East. Tankers themselves take weeks to travel between regions, so shipments that stopped weeks ago mean no immediate deliveries are en route.
According to market trackers, the last shipment of jet fuel that reached Europe via the Strait of Hormuz left before the war began; no subsequent deliveries are currently on the way. That built-in lag means markets will stay tight for some time, even in optimistic scenarios. “The market’s effectively seized up,” says Shaw. It will take a long time for supplies and prices to return to anything resembling normal.