Fuelling the Crisis: How the Iran-US Conflict Exposed Aviation's Most Dangerous Vulnerability

There is a line buried in airline annual reports that tends to get overlooked in good times. Fuel costs are, the reports note, "extremely volatile and unpredictable, and even a small change in market fuel prices can significantly affect profitability." Southwest Airlines wrote that in its 2025 filing. Weeks later, it became the understatement of the year.

When the US and Israel struck Iran on 28 February 2026, the airline industry's most intractable cost problem moved from chronic to acute, almost overnight.

Before the war, jet fuel in the United States was trading at around $2.50 per gallon. By 2 April, it had reached $4.88, nearly double in the space of five weeks. The global average jet fuel price for the week ending 3 April rose to $209 per barrel, up more than 132 per cent on an annual basis, according to IATA. The culprit was straightforward: the effective closure of the Strait of Hormuz choked off supplies of both crude and refined products, driving prices sharply higher.

To understand why this matters so much, you need to understand how thin the airline business already was before a single missile was fired. American, Delta and United collectively generated over $170 billion in revenue in 2025. Yet for every dollar coming in, airlines kept just four cents in profit. Fuel, even before the war, consumed roughly a fifth of every revenue dollar, the second largest cost after labour. A sustained $10-per-barrel jump in oil prices can cost a carrier hundreds of millions in a single quarter. What the Iran conflict delivered was not a $10 jump. It was a near-doubling.

United Airlines CEO Scott Kirby put the stakes plainly in a memo to employees in March. "The reality is, jet fuel prices have more than doubled in the last three weeks. If prices stayed at this level, it would mean an extra $11 billion in annual expense just for jet fuel. For perspective, in United's best year ever, we made less than $5 billion."

Scott Kirby

The response across the industry was swift. United became the first major US carrier to scale back its schedule, cutting approximately 5 per cent of planned routes during the second and third quarters of 2026. Delta and United both raised checked baggage fees. Nearly 50,000 flights were cancelled globally since the conflict began, according to aviation analytics firm Cirium. Passengers felt it immediately: average economy fares for round-trip international flights rose to $998 as of 30 March, up from $774 before the war began.

The crisis also exposed a strategic vulnerability that US carriers had quietly built up over years of stable fuel markets. Most US airlines no longer hedge fuel costs. Southwest was one of the last holdouts, and it quit last year. That decision, sensible enough when oil markets were calm, left carriers entirely exposed when geopolitics intervened.

Analysts at Tourism Economics now expect airfares to be 5 to 10 per cent higher than previously forecast across 2026 and 2027. Deutsche Bank calculated that if jet fuel prices remain elevated at roughly $2 per gallon above pre-war levels for a full year, airfares would need to rise by around 17 per cent to compensate.

The deeper issue is structural. Airlines operate on margins so thin that they cannot absorb external shocks, they can only pass them on. The four cents of profit that survive every revenue dollar offer no buffer against a world where the Strait of Hormuz can be closed on a Tuesday and jet fuel can double by Friday.

Warren Buffett once described the airline business as a value-destroying trap for investors. The Iran conflict has served as a reminder of why.