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The global airline industry faces an unprecedented energy crisis, with jet fuel prices reaching record highs and projected profits halved, due to the Middle East conflict, according to International Air Transport Association
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Producers in the Gulf have been forced to decrease production as the Strait of Hormuz closure cut crude oil delivery by roughly 10 million barrels per day, about 10% of global consumption, and briefly pushing crude prices toward $150 per barrel
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Jet fuel prices have essentially doubled since late February; the crack spread hit a record $80 per barrel in April
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IATA now projects airlines to post a combined net profit of $23 billion in 2026, down from a previously forecast $41 billion and roughly half the $45 billion estimated for 2025
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Global passenger traffic is now forecast to grow just 2.1% in 2026, sharply down from the December 2025 forecast of 4.9%
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Air cargo growth is expected to slow to 0.7% for the year from a prior forecast of 2.6%
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Sustainable aviation fuel output is projected at only 2.4 million tonnes in 2026 or 0.8% of total jet fuel demand, short of the 500 million tonnes needed by 2050 to achieve the industry’s net-zero target
The global airline industry is navigating what the International Air Transport Association (IATA) considers an “energy crisis” without modern precedent, as the war in the Middle East has driven jet fuel prices to record highs and cut the industry’s projected profits in half.
Oil production and delivery have been affected after the US and Israel attacked Iran on February 28, 2026, and retaliatory actions halted commercial shipping through the Strait of Hormuz, a chokepoint through which transits approximately 19% of global crude oil, 18% of liquefied natural gas, and 6% of refined petroleum products.
The disruption cut crude oil supply by around 10 million barrels per day, an unprecedented contraction representing 13% of global crude demand, and briefly sent physical crude prices surging to nearly $150 per barrel.
The blow to aviation has been immediate and severe.
“When war broke out in the Middle East in March, oil prices jumped, and jet fuel prices skyrocketed,” IATA outgoing director general Willie Walsh said in a speech at the association’s 82nd Annual General Meeting in Rio de Janeiro on June 6, 2026. “As a result, we expect average jet fuel prices to be 70% higher year-on-year. That will add $100 billion to our collective fuel bill this year.”
IATA now projects airlines to post a total net profit of $23 billion in 2026, down from a previously forecast $41 billion and roughly half of the $45 billion the industry is estimated to have earned in 2025. The net margin is expected to compress to 2%, its weakest reading since the depths of the Covid pandemic.
An IATA report, titled “Energy in Crisis,” underscores that the current disruption is not merely an oil shock but simultaneously a refinery crisis of extraordinary severity. The Strait accounted for approximately 470,000 barrels of jet fuel per day in normal conditions, representing about 23% of global jet fuel exports.
Europe received roughly 80% of jet fuel flows originating from Gulf refineries, which in turn supply 40% of the continent’s total imports of the product. In Singapore, the jet fuel price reached an all-time high above $230 per barrel, while the jet fuel trade globally dropped by nearly 30% between February and April.
The margin between crude oil and jet fuel reached a record $80 per barrel in April, evidence that refinery outages and constrained throughput were amplifying the crisis well beyond the disruption to raw crude supply. IATA now assumes an average jet fuel price of $150 per barrel for the full year, against $90 per barrel in 2025.
Structural fault lines exposed
The report states that the energy shock has exposed deep structural vulnerabilities that predate the conflict. Europe’s refining capacity has declined by approximately 20% over the past two decades, even as global refinery output expanded by about 16%, leaving the continent importing roughly 60% of its jet fuel consumption, over a third of which originates in the Middle East.
The crisis has also cast a harsh light on the inadequacy of the global sustainable aviation fuel program. SAF output is projected at only 2.4 million tonnes (MT) in 2026, 0.8% of total jet fuel demand, while 500MT will be required by 2050 to reach the industry’s net-zero carbon target.
READ: IATA, ICAO boost joint push for sustainable aviation fuel
Walsh was pointed in his assessment of government policy failures. “This energy crisis would have been very different if investments in SAF production had been prioritized sooner,” he said. “Promoting SAF in support of sustainability, jobs, and energy security should be a ‘no brainer’ for governments.”
Slower skies, rising fares
Passenger traffic is now forecast to grow 2.1% in 2026, a sharp deceleration from the December 2025 projection of 4.9%, as higher fuel costs, airspace disruptions, and longer routings weigh on airline scheduling.
The Middle East faces the deepest contraction, with regional RPK declining approximately 11.4% for the year after falling nearly 60% in March and April alone. Africa, by contrast, is projected to grow 10% as traffic diverts around the conflict zone.
Air cargo, which entered 2026 in a position of strength, is now expected to grow just 0.7% for the year, down from a prior forecast of 2.6%, as Middle Eastern hub disruptions tighten global network capacity and push adjustment primarily through higher yields rather than volume growth.
READ: Q2 air freight rates highest in almost 4 years due to Gulf crisis
The energy shock is feeding through to the broader global economy. IATA’s central scenario projects global GDP growth slowing from around 3% to 2.5% in 2026, with global inflation expected to exceed 5% and possibly rising above 6% if the disruption extends into next year. The risk of stagflation, rising inflation coinciding with stalling economic activity, is described as looming, particularly in energy-importing economies where fiscal and monetary policy space is already constrained
Among the most acutely exposed economies are the Philippines, which imports up to 98% of its oil from the Persian Gulf and has declared a national energy emergency, as well as Japan and South Korea, which share similar import dependencies. Iran’s economy is projected to contract by more than 10% this year, while Qatar and Iraq face GDP declines of 6% or more.
The IATA report, Global Outlook for Air Transport: Energy in Crisis, was released June 7, 2026 at the association’s meeting Rio de Janeiro, hosted by LATAM Airlines Group.
