Airlines face a fuel hedging reckoning as Iran conflict reshapes flying costs

Jet fuel prices have doubled since Operation Epic Fury began on February 28, 2026, creating sharp divides among airlines based on their hedging strategies. Spot prices jumped from $96 per barrel to $197, with northwest European jet fuel reaching a record $1,840 per metric ton on April 3, due to the Strait of Hormuz closure and Persian Gulf refinery losses.

Fuel represents 20% to 35% of operating costs, turning many pre-conflict flights unprofitable. Hedging against crude oil offers incomplete protection, as jet fuel prices have risen over twice as much as crude amid widened refining margins, from $21 to peaks of $144 per barrel in Asia.

European airlines hold the most coverage, averaging 80% for 2026, though it declines later in the year. Ryanair secured 84% of this quarter at $77 per barrel and 80% for next year at $67, despite supply risks through June. Lufthansa covered 82% for the current quarter and 77% for the year, pausing new hedges. IAG hedged 60% to 70%, easyJet 84% for the first half at $715 per ton dropping to 62%, and Wizz Air 83% for its fiscal year at $681 to $749 per ton. Finnair targets 70% to 95% short-term, while Norwegian Air Shuttle has 45% for 2026. SAS entered unhedged, canceling nearly 1,000 April flights, and AirBaltic with just 6% coverage received a €30 million emergency loan amid bond drops and a halted IPO.

US carriers like Delta, American, United, and former hedger Southwest abandoned programs years ago and now face full exposure, with shares down 4.6% to 6.6% on April 2. Delta relies partly on its Trainer refinery. United cut 5% of flights.

In Asia-Pacific, supply shortages compound price hikes. Qantas hedged 81% for late 2026, Singapore Airlines 49% short-term declining further, Cathay Pacific 30% through mid-2026 with suspended Middle East flights, and China Eastern unhedged. Vietnam Airlines axed 23 weekly domestic flights.

Many carriers, including Ryanair and Lufthansa, delay new hedges hoping for de-escalation, as upcoming earnings will reveal Q2 and Q3 coverage amid potential shortages at European hubs.