Airline Turbulence as War Sends Jet Fuel Prices Soaring

Airlines are facing a fuel cost crisis due to the ongoing conflict in the Middle East, which has driven the price of kerosene to an unprecedented high. Jet fuel prices in European markets have surged to a three-and-a-half-year peak, marking the highest levels since the shortages experienced during the pandemic.

Crucially for the European airline industry, the price of kerosene has rapidly decoupled from the cost of crude oil, which recently increased more than ten per cent to approximately $78.60 per barrel. This price is twenty per cent higher than two weeks ago. According to Argus Media, a leading energy and commodity prices expert, the cost of fuel being delivered to airlines has risen twenty-three per cent this week alone and is up forty-eight per cent since last Friday, with a staggering sixty-eight per cent increase observed within the past month.

Trading conditions in the jet fuel market are described as chaotic, with analysts noting that supply is under significant threat due to the conflict. Despite this turmoil, market values for jet fuel appear disproportionately high compared to fundamental economic factors. Market participants have expressed bewilderment, stating that no fundamentals can adequately explain these prices.

Currently, jet fuel prices are running at nearly double the cost of Brent crude oil, a differential never previously recorded. The Mideast Gulf is vital for Europe’s jet fuel supplies, providing at least forty per cent of imports in 2025. Kuwait remains the largest jet fuel supplier to Europe.

The Strait of Hormuz, a crucial maritime gateway to the Persian Gulf’s oil-producing regions, is presently under blockade following attacks on Iran by the US and Israel. This situation raises concerns about a prolonged conflict that could exacerbate existing fuel supply issues. While European refiners can increase jet fuel output to some extent, experts suggest that they cannot sufficiently offset a prolonged loss of supply from the Mideast Gulf.

Simultaneously, soaring freight rates are making imports from other regions economically unfeasible. The European aviation sector had already tightened in recent years due to growing demand for jet fuel.

Consequently, shares of European airlines have been significantly impacted. IAG, the parent company of British Airways, has seen its stock fall sixteen per cent from its recent record highs, impacting its intercontinental flights. Shares in easyJet, not operating in the region, are down six per cent this week, while Wizz Air has experienced a twenty per cent drop over the past week. Conversely, Ryanair reported that it is ninety per cent hedged for its jet fuel through to March 2027, having forward-bought at $67 per barrel. IAG has secured prices for sixty-two per cent of its fuel for 2026, while easyJet has hedged sixty-two per cent for the summer season at $68.80 per barrel.