War-Driven Fuel Shock Sends Global Airfares Soaring

1. The ongoing war in the Middle East has resulted in a dramatic rise in aviation fuel prices, more than doubling since before the conflict began. This surge has led to worldwide flight cancellations, restrictions on fuel exports across Asia, and higher airfares, as airlines strive to navigate the escalating costs. The disruption in crude supplies from the conflict has had a particularly severe impact on the aviation industry, causing financial stress for countries dependent on fuel imports and compelling airlines to either reduce capacity or raise ticket prices while refinery output tightens. [para. 1][para. 2]

2. Aviation fuel prices have increased at a much faster rate than crude oil itself. According to S&P Global data, the FOB Singapore jet fuel price climbed to $227.42 per barrel as of March 19, marking a 143% increase from $93.57 pre-conflict, while Brent crude rose about 40% to $112 per barrel. The aviation fuel supply chain has been severely disrupted, with limited crude supply forcing some refineries to cut back processing, temporarily lowering the global refinery throughput. Further escalation of the conflict could result in more refineries scaling back or even halting operations, exacerbating the supply shortage by raising feedstock costs and reducing refined fuel exports. [para. 3][para. 4]

3. Asia, a major importer of Middle Eastern crude, has felt the brunt of these disruptions, with several refineries cutting output and restricting exports. By mid-March, Europe’s jet fuel market had become more expensive than Asia’s, showing its higher dependence on Middle Eastern crude. Export restrictions in response to the conflict, such as China’s ban on aviation fuel exports and similar curbs in South Korea and Thailand, have intensified the fuel shortage in Asia. Despite potential weakened demand, supply constraints continue due to these bans. [para. 5][para. 6]

4. Vietnam is especially vulnerable, importing about two-thirds of its aviation fuel, mainly from China and Thailand. Facing acute supply risks, government meetings have addressed the crisis, and Vietnam Airlines is finding it difficult to secure fuel for April. There’s an expectation of domestic flight suspensions and reductions in government support sought as airlines deal with shortages. Australia and New Zealand, also reliant on imports, have resorted to emergency fuel reserves and flight reductions, while Cuba is experiencing even harsher shortages due to U.S. sanctions and has seen airline rerouting and suspended routes. [para. 7][para. 8]

5. Aviation fuel typically constitutes about 30% of airline operating costs. This surge is significant for an industry with a 2025 average net margin of just 3.6%. For example, Air China’s fuel costs reached 24.3 billion yuan (31.05% of total expenses) in the first half of 2025, with a 5% change in prices equaling 1.2 billion yuan in cost differences. Many airlines, particularly in Europe and Asia, hedge their fuel costs: 45%-85% of their 2026 needs are secured at or below $60 a barrel. Notable hedged airlines include China Eastern, Air France-KLM, Cathay Pacific, Lufthansa, Norwegian, Qantas, Ryanair, and Singapore Airlines. [para. 9][para. 10]

6. U.S. airlines, being less hedged, face higher vulnerability. United Airlines plans a 5% reduction in its schedule. CEO Scott Kirby warns that if prices stay at these levels, fuel could add $11 billion in yearly costs, and prices may not drop below $100 a barrel before 2027. To offset the costs, airlines globally are raising fares; over 60% of surveyed airlines in Vietnam have done so or plan to, and IATA forecasts an 8%-9% global fare increase. Specific Chinese airline surcharges have doubled, with upcoming domestic adjustments expected to substantially raise fees. [para. 11][para. 12]

7. As travelers anticipate higher fares, early bookings have surged in China, with domestic and international bookings made a month in advance up by over 30% and 20%, respectively. Even bookings 8-14 days ahead rose nearly 20%. The situation remains uncertain, as supply chain disruptions are projected to last at least another month. Even if geopolitical tensions decrease, recovery will be slow due to delays in logistics, procurement, and refinery adjustments, keeping prices elevated and the fuel market volatile. [para. 13][para. 14]