The prolonged disruption of the Strait of Hormuz is pushing the global aviation industry into an unprecedented fuel crisis. This crucial waterway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea carries approximately 20% of the world's oil shipments when operating normally. Since the outbreak of the US-Israel conflict with Iran, traffic across the strait has been severely restricted for months. The energy trade chain has been abruptly severed, leading to a widespread shortage of jet fuel. Europe has been hit hardest, and US airlines are also beginning to feel the direct financial impact. Airlines are forced to employ every possible means to maintain operations, including alternative procurement, fuel hedging, adjusting flight schedules, and unconventional logistical methods.

How a strait blockade could shatter the global jet fuel supply chain

Following the de facto closure of the Strait of Hormuz due to the conflict, the export capacity of the Middle East, a traditional core region for jet fuel supply, has significantly decreased. While Iran continues to allow limited quantities of fuel to pass through, the full resumption of normal trade remains uncertain. Europe, which previously relied on the Middle East for about half of its jet fuel imports, has been among the hardest hit regions. Countries heavily dependent on Middle Eastern supplies, such as the UK, France, and Germany, are particularly vulnerable. In recent decades, many European countries have proactively reduced refining capacity to promote a green transition, resulting in virtually no buffer space when supply chains are disrupted. In July, several European airlines publicly warned that their jet fuel inventories were nearing depletion. Although they quickly turned to the US and Asia for alternative imports, the pressure of shortages remains significant. Energy consultancy Energy Aspects predicted in mid-June that Europe's jet fuel supply deficit in the third quarter would approach 600,000 barrels per day, while the US and Asia-Pacific regions would have surpluses of approximately 116,000 barrels and 425,000 barrels per day, respectively. European inventories at the beginning of June were approximately 38 million barrels, equivalent to only about 30 days of demand. The International Energy Agency's estimates are roughly the same. EU Energy Commissioner Dan Jorgensen acknowledged that the region may face a genuine jet fuel shortage around the end of summer, but Brussels is prepared to coordinate the release of national strategic reserves if necessary. Meanwhile, the United States, Nigeria, Canada, India, and South Korea have stepped in to supply jet fuel to Europe. Italian refineries also increased jet fuel production by about 10% in the first four months of this year to prioritize domestic demand. These measures have temporarily alleviated the immediate crisis but cannot fundamentally change the situation of limited supply.

Soaring prices and the airlines' difficult response

Jet fuel prices fluctuated wildly after the Strait of Hormuz closure. They surged to $215.32 per barrel at the end of March, and although they subsequently retreated, they remained slightly above $130. Jet fuel typically accounts for 20% to 25% of airline operating costs; high prices directly squeeze profit margins and make it difficult for airlines to attract customers through price reductions. Some airlines have been forced to cut flights. Ryanair, the Irish low-cost carrier, is a prime example. The company's unhedged 20% fuel costs increased by 11% due to soaring prices. Its CEO, Michael O'Leary, pointed out that the company's conservative hedging strategy played a crucial buffering role: 80% of jet fuel is hedged in 2027, locking in a price of $67 per barrel; the hedging ratio is 15% in 2028, with a price of $85 per barrel. This proactive approach helped Ryanair stabilize relatively during this round of shocks. The situation is equally severe in the United States. In recent years, due to the expansion of domestic refining capacity and relatively abundant fuel supply, many US airlines have reduced their jet fuel price hedging, resulting in more direct losses during extreme volatility. Southwest Airlines incurred nearly $900 million in additional fuel expenses in the second quarter. To ensure supplies to the West Coast, the company took unconventional measures this spring: transporting 12.6 million gallons of jet fuel from Houston, Texas to Los Angeles, California via the Panama Canal. Chief Financial Officer Tom Doctory stated that this move provided the West Coast with approximately one week of buffer during the most strained and risky period. California, heavily reliant on imported fuel, is particularly vulnerable to global shortages. United Airlines, in mid-July, announced that it expects additional fuel costs for the entire year of 2026 to be nearly $6 billion higher than initially anticipated. This figure clearly illustrates that even large U.S. airlines are not entirely immune to the ripple effects of disruptions in the Strait of Hormuz.

How long can alternative supplies last? Weaker refining countries will face greater pressure.

Currently, airlines primarily rely on switching to alternative suppliers to maintain flight operations. Global supply constraints continue to drive up jet fuel prices. This strategy is effective in the short term, but no one can guarantee how long it will last. Countries with weaker refining capabilities and heavier reliance on imports are expected to be disproportionately impacted. European experience has demonstrated that when green transitions coincide with geopolitical risks, the vulnerability of energy security is rapidly amplified. The closure of the Strait of Hormuz is not only an energy event but also a stress test of the resilience of the global aviation industry. The flexibility and innovation shown by airlines in the fuel scramble may temporarily maintain flight networks, but it cannot mask the deep-seated risks of supply chain disruptions. As long as traffic across the strait cannot return to normal, the dual pressures of jet fuel shortages and high prices will continue to drag down the entire industry.

Frequently Asked Questions

Q: Why is the Strait of Hormuz so crucial to global jet fuel supply? A: Under normal circumstances, this waterway transports about 20% of the world's oil and is a core channel for Middle Eastern crude oil and refined product exports. Once restricted, Middle Eastern jet fuel cannot be transported smoothly, immediately creating supply gaps in Europe and other regions that rely on it for imports, leading to drastic price fluctuations. Q: Why is Europe more susceptible to jet fuel shortages than other regions? A: Previously, about half of Europe's jet fuel imports came from the Middle East. At the same time, many countries actively reduced refining capacity to promote green transitions, resulting in limited inventory buffers. Although alternative imports have been initiated after the outbreak of the conflict, it is still difficult to completely fill the potential gap of nearly 600,000 barrels per day. Q: What measures are airlines currently taking? A: These include shifting to alternative suppliers in the US and Asia, increasing fuel hedging ratios, adjusting flight schedules to cut some routes, and using unconventional logistics methods such as transoceanic shipping to ensure fuel supply to key airports. Q: How significant is the financial impact on US airlines? A: Southwest Airlines incurred nearly $900 million in additional fuel expenses in the second quarter, and United Airlines expects additional costs of nearly $6 billion for the entire year of 2026. The previous decline in hedging ratios made them directly more vulnerable to price spikes. Q: How long might this crisis last, and what will be the future impact? A: As long as cross-strait traffic cannot fully recover, supply constraints and high prices will persist. Countries with weak refining capacity and high import dependence will suffer greater impacts, and the operating costs and ticket price pressures on the aviation industry will be difficult to alleviate fundamentally in the short term.