The war in Iran, involving U.S. and Israeli strikes, has triggered a surge in jet fuel prices, disrupting global airline operations and exposing vulnerabilities in fuel hedging strategies. Kerosene prices have doubled from budgeted levels of $88 per barrel to $216, with fuel comprising 26-40% of operating costs according to IATA data. Strikes on refineries and blockages in the Strait of Hormuz, through which 20% of global oil transits, have amplified volatility.
Airlines are imposing fuel surcharges to offset rises. Air France-KLM added €50 per long-haul ticket, reaching €319 on transatlantic routes; Corsair, Air Austral, Air Caraïbes, and French Bee levied €60 supplements. Cathay Pacific doubled surcharges from March 18, 2026, as CEO Ronald Lam noted fuel costs were twice recent averages. AirAsia introduced temporary ticket and surcharge hikes. Delta and American Airlines each absorbed $400 million in March surcoûts.
Hedging offers partial protection but falls short. Cathay Pacific CFO Rebecca Sharpe stated their crude oil coverage excludes full kerosene exposure due to its narrower market. Ryanair secured 80% at $67 per barrel through March 2027; Air France-KLM covered 62-70%; Lufthansa and others hedged similarly but still adjusted fares. Asian carriers like Singapore Airlines fare better with kerosene-specific hedges, while others face 6% net profit drops per $10 refining margin rise, per BofA estimates.
Thousands of flights were canceled: 966 of 4,218 Middle East-bound on one day, per Cirium, with airspace closures in Iran, Israel, Qatar, and others forcing reroutes. European and low-cost carriers, often better hedged, announce capacity cuts and fare hikes amid refining margin spikes.