Airlines Scramble for Jet Fuel as Hormuz Disruption Drags On - Energy | PriceONN
The months-long closure of the Strait of Hormuz has led to severe fuel shortages around the globe, as companies battle to continue operations. Airlines have been hit hard as they struggle to obtain enough jet fuel to maintain their regular flight schedules. The U.S.-Israeli war on Iran led to the closure of the Strait of Hormuz – a key trade corridor connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, via which roughly 20 per cent of the world’s oil is transported when fully...

Aviation Fuel Crisis Deepens Amidst Geopolitical Tensions

The world's air carriers are grappling with an unprecedented jet fuel shortage, a direct consequence of the extended shutdown of the Strait of Hormuz. This vital maritime artery, responsible for transporting approximately 20 percent of global oil when fully operational, has become a choke point, crippling energy trade and leaving numerous nations facing severe fuel deficits. The conflict involving the U.S. Israel, and Iran has precipitated this crisis, impacting flight operations globally.

Airlines are finding it increasingly difficult to secure the necessary fuel volumes to maintain their established routes. Reports from July indicated that several European carriers were on the brink of exhausting their jet fuel reserves. While Europe has sought alternative imports from the United States and Asia, the strain persists. Nations like the United Kingdom, France, and Germany, heavily reliant on Middle Eastern fuel sources, are particularly vulnerable.

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Compounding the issue, many countries have intentionally scaled back their domestic refining capabilities in recent decades, prioritizing a green transition. This strategic shift, while environmentally motivated, has left them more exposed to supply chain vulnerabilities like the current Hormuz blockade. Pre-conflict, Europe depended on the Middle East for about half of its jet fuel imports. Although Iran has permitted some limited fuel transit, the timeline for a full resumption of normal trade remains uncertain given the ongoing hostilities.

European Jet Fuel Market Faces Significant Deficit

Consultancy Energy Aspects projected a substantial jet fuel supply shortfall for Europe in the third quarter, estimating a deficit of nearly 600,000 barrels per day. This starkly contrasts with the surpluses seen in the United States and the Asia-Pacific region, which are forecast to have deficits of around 116,000 and 425,000 barrels per day, respectively.

As of early June, Europe's jet fuel inventories stood at approximately 38 million barrels, a quantity sufficient to cover only about 30 days of demand. The International Energy Agency (IEA) has echoed these concerns, anticipating similar regional challenges. EU Energy Commissioner Dan Jorgensen has acknowledged the potential for shortages towards the end of the summer season, indicating that Brussels is prepared to coordinate the release of national strategic reserves if necessary.

In response, several European countries have actively pursued alternative fuel suppliers. Nations such as the U.S. Nigeria, Canada, India, and South Korea have stepped in to provide much-needed jet fuel to the continent. Italy, for instance, saw its refineries increase jet fuel output by approximately 10 percent during the first four months of the year, successfully meeting domestic requirements.

Price Volatility and Airline Financial Strain

Jet fuel prices have exhibited extreme volatility since the Strait of Hormuz disruption began. Prices surged to a high of $215.32 per barrel in late March before retreating to just above $130 per barrel. Given that jet fuel constitutes between 20 to 25 percent of an airline’s total operating expenses, maintaining affordable ticket prices has become a significant challenge. Consequently, some airlines have already been compelled to reduce flight frequencies.

The low-cost carrier Ryanair reported that 20 percent of its unhedged fuel exposure was significantly impacted by price spikes, leading to an 11 percent increase in operating costs. The airline has hedged 80 percent of its jet fuel needs for 2027 at $67 per barrel and 15 percent for 2028 at $85 per barrel. Ryanair's CEO has credited the company's prudent hedging strategy for its resilience against rising fuel costs.

Meanwhile, U.S. carriers are also navigating supply challenges. Southwest Airlines, for example, took the initiative to ship jet fuel from Texas to California in the spring, a move that secured about a week's supply for the West Coast during a period of acute scarcity. This shipment traversed from Houston to Los Angeles via the Panama Canal, carrying 12.6 million gallons of fuel.

California's high dependency on fuel imports makes it more susceptible to global supply disruptions compared to other U.S. regions. Southwest disclosed in July that its fuel expenditures in the second quarter exceeded those of the previous year by nearly $900 million. Many U.S. airlines have reduced their reliance on fuel hedging in recent years due to historically abundant domestic supply and expanded refining capacity. This shift now exposes them to the sharp price swings seen recently.

United Airlines anticipates an additional fuel expense of almost $6 billion for the full year 2026, a revised forecast compared to earlier expectations. Airlines worldwide are seeking alternative jet fuel sources as global supplies remain tight, driving up prices. While these adaptive measures have provided temporary relief, the long-term sustainability of such strategies is uncertain, particularly for nations with limited refining infrastructure.

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