Jet fuel prices have doubled to over $195 per barrel due to the Iran war and Strait of Hormuz closure, prompting major U.S. airlines to sharply cut 2026 profit margin forecasts. United Airlines warns of an $11 billion annual fuel cost surge, while American Airlines faces slashed earnings estimates to $0.43 per share.
The surge, up 100% since late February 2026, outpaces Brent crude’s 50% rise, driven by an 80% widening crack spread from refining bottlenecks. Fuel, typically 25% of operating costs, now threatens route-level losses across carriers.
Airlines respond with 5% capacity cuts at United, 1,000 flight cancellations at SAS, fare hikes up to 20%, and fuel surcharges jumping from $300 to $800 on some international routes. U.S. carriers, lacking hedges unlike Europeans, absorb the full shock, leading to a 12% NYSE Arca Airlines Index drop.
Delta Air Lines bucks the trend via its Monroe refinery, maintaining $6.50-$7.50 earnings guidance despite $400 million March costs. American’s $36.5 billion debt and no hedging amplify vulnerability, with every penny fuel rise adding $50 million yearly.
Low-cost carriers like Spirit and Frontier face acute margin erosion. Operators accelerate retiring fuel-inefficient aircraft for 15-30% gains from 737 MAX 10 and A321neo, while boards eye renewed hedging for cost predictability amid geopolitical risks.