The barrel was never the problem

Energy risk in global passenger air transport: the Iran conflict's closure of the Strait of Hormuz, Houthi attacks constraining the Bab el-Mandeb, and the refining margin that decides which carriers survive the resulting jet fuel shock, assessed as at 16 September 2026.

On 13 September a vessel was struck in the Strait of Hormuz. Talks between Iranian and Gulf officials in Oman on reopening the waterway were postponed indefinitely. That is where this sits as at 16 September 2026: roughly day 200 of a closure that began on 28 February, when air strikes on Iran shut the strait.

A United States and Iran ceasefire reopened it in mid-June and collapsed within weeks after further attacks on tankers. Since late July, Houthi attacks have constrained shipping through the Bab el-Mandeb at the other end of the route to Europe. On 6 September, six ships passed through the Strait of Hormuz, which normally carries about 85 a day.

IATA describes it as the largest supply disruption in recorded history, one that is still running. US Gulf Coast jet fuel traded at about $4.02 to $4.19 a gallon in early September, against $2.43 on 27 February (EIA spot price). Brent crude, the global oil benchmark, stood at $118.06 a barrel on 11 September, against a low of $59.93 on 16 December 2025 and a high of $138.21 on 7 April 2026 (EIA spot price).

Airlines burn more fuel per dollar of revenue than almost any other business, so a war that shuts the world's most important oil artery lands on them first. The remedy looks obvious: buy the fuel forward. Ryanair is the apparent proof, roughly 80 per cent hedged for its 2027 financial year at about $668 a tonne (Ryanair first-quarter FY27 results).

Across the rest of the industry it did not work, for a reason with very little to do with the price of oil. An airline never buys crude. It buys jet fuel, a narrow kerosene cut of a refined barrel and pays two prices: the barrel, and the premium a refinery charges to turn that barrel into jet fuel. That second price is the crack spread. It sat near $20 a barrel for most of the last decade; IATA forecasts it to average $57 a barrel in 2026, against $21 in 2025, after a record $80 in April.

Most carriers hedged the first price and left the second open. So the defining exposure of 2026 was not the cost of oil but the cost of refining it, a margin owned by somebody else and set by a handful of complexes clustered around the very strait the war has closed. A carrier could be 80 per cent hedged and take the blow in full.

The Strait of Hormuz closure, and the seven months since

Everything here is downstream of one waterway. The Strait of Hormuz carries about a quarter of the world's seaborne crude and also serves the Gulf refineries that, with their Asian counterparts, make around 40 per cent of the world's jet fuel. A conflict that closes it strikes the crude layer and the refined layer at once. This war therefore reached aviation faster and harder than an oil shock normally does.

Nor has the closure been steady. Traffic ran near 5 per cent of the pre-war average through the spring. The mid-June ceasefire produced the only real relief of 2026, lasting weeks before attacks on tankers ended it. Every planning assumption made in that window had to be unmade in July.

Since then the picture has widened rather than settled. Houthi attacks on shipping through the Bab el-Mandeb, including Saudi exports, constrain the Red Sea passage carrying Gulf and Indian kerosene to Europe, so product tankers divert around the Cape, adding about two weeks. The Energy Information Administration expects Middle East output below its pre-conflict average into the second quarter of 2027.

Those are the events. What follows is what they put at risk, ranked, then the evidence behind each.

Seven months of a closed strait, and what each stage did to airlines

When	What happened	What it did to airlines
28 Feb 2026	Air strikes on Iran close the Strait of Hormuz	The largest supply disruption in recorded history begins (IATA)
7 Apr 2026	Brent spot reaches $138.21, its 12-month high (EIA)	The jet fuel crack spread sets a record $80 a barrel in April (IATA)
2 May 2026	Spirit Airlines ceases all flight operations	A second Chapter 11 inside a year ends with the airline grounded
7 Jun 2026	The 2026 industry profit outlook is halved	Fuel bill: 2025 actual $252bn to 2026 forecast $350bn
17 Jun 2026	A US and Iran ceasefire reopens the strait	The only sustained relief of 2026; it lasts weeks
Early Jul 2026	The arrangement breaks down after attacks on tankers	United says fourth-quarter capacity will decline from published schedules
Late Jul 2026	Houthi attacks constrain shipping through the Bab el-Mandeb	A second chokepoint on the route to Europe
6 Sep 2026	Six ships transit Hormuz against roughly 85 normally	US Gulf Coast jet fuel spot about $4.02 to $4.19 a gallon, against $2.43 on 27 February (EIA)
13 Sep 2026	A vessel is struck; reopening talks postponed	No near-term catalyst for relief

Note. Every number in this piece is downstream of these dates. The shock is not a historical episode being reviewed; it is a live disruption on roughly its 200th day.

Five risks, ranked by how badly they bite

1. The hedge that runs out. The only risk here with a date on it. European cover was front-loaded and runs off as contracts expire: IAG reported in its first-quarter 2026 results that it was hedged at about 70 per cent for the rest of 2026, and Ryanair reported about 80 per cent of its 2027 financial year hedged at $668 a tonne. Replacement cover must be bought at today's prices. The original book was written against crude, not the refining margin that moved.

2. A second chokepoint. Hormuz is down to a handful of transits a day, a vessel was struck there on 13 September, and reopening talks are postponed. Houthi attacks constrain shipping through the Bab el-Mandeb at the other end of the route to Europe (EIA). The severe-disruption scenario carries a 30 per cent weight (Figure 5).

3. The single-artery hub. Less likely, but immediate and total when it lands, however well capitalised the airline. Jet fuel reaches an airport through one or two pipelines into a fixed tank farm: Colonial feeds seven East Coast airports, Exolum around 35 per cent of United Kingdom aviation fuel. Airports depend on a single point of supply for electricity too. A fire at the North Hyde substation on 20 March 2025 cut one of Heathrow's three power supply points; because of how the airport's internal network was designed, operationally critical systems lost power and the airport closed while the network was reconfigured, a task estimated at 10 to 12 hours (NESO review, UK government response).

4. Demand destruction. The textbook case is strong: leisure travel is price-elastic at roughly 1.9 against business at 0.4, so a 10 per cent fare rise should cut leisure trips by about 19 per cent. Fares are up 18 per cent. But it bites less hard than that implies: air fares are only about a quarter of a leisure trip's cost and load factors are at a record.

5. The compliance bill for clean fuel. Sustainable aviation fuel, made mostly from waste cooking oil, is mandated into European tanks at a rising share and costs roughly two and a half times conventional jet fuel on IATA's assumed prices, with penalties under Regulation (EU) 2023/2405 (Article 12) set at no less than twice that gap. Article 5 of the same regulation requires carriers to uplift at least 90 per cent of their annual fuel at each qualifying European airport, which stops them flying in cheaper fuel. Last, because it is a cost rather than a cliff.

A tenth of a barrel: the jet fuel crack spread explained

Jet fuel is manufactured, not extracted. Only about a tenth of a barrel of crude comes out as the kerosene cut a turbine will burn. How much a refinery makes is the refiner's commercial decision, not the airline's. A power station buying gas buys the commodity. An airline buys a processed product, and pays whatever the processing is worth on the day.

The processing is worth a great deal when the processors are in trouble. Middle Eastern jet fuel output fell by roughly 640,000 barrels a day between March and June, while refiners in Europe, North America and West Africa lifted their kerosene yields to plug the hole. That reallocation is slow and finite. Jet fuel therefore ran well ahead of crude.

For an airline treasury the consequence is uncomfortable. A hedge book quoted as a percentage of consumption can badly overstate real protection, because the percentage usually refers to crude. When the damage arrives through refining rather than extraction, that cover does not respond: even a flat oil price would not have spared the industry.

Note. The barrel is only part of the price of a tank of jet fuel. The rest is the refiner's margin, which most carriers' hedges did not cover.

The industry that cannot keep a week's jet fuel

That margin would matter less if the industry could wait out a price spike. Most heavy industries can: they hold stock, switch input, or slow the line. Aviation can do none of the three. A turbine certified for Jet A-1, the standard kerosene grade the global fleet runs on, burns that and nothing else. Jet fuel cannot be stockpiled near the point of use.

The cover is measured in days. Large airports hold roughly three to seven days of reserve fuel, sized to what they pump daily rather than to survive a siege, against an International Energy Agency line of about 23 days. The United States entered 2026 forecast at about 21 days, the lowest since 1963. That came from refinery closures rather than the war: the buffer was thin before the shock arrived.

Individual hubs sit lower still, usually because of one upstream asset: Johannesburg's OR Tambo draws 70 to 80 per cent of its jet fuel from a single refinery.

Put the two together and the transmission speed makes sense. Jet fuel is the second largest airline cost after labour, at 31.4 per cent of operating expenses, and the only large one that can reprice within weeks while labour, leases and airport charges stay contracted. A move in the refining margin reaches the income statement inside a single fuel cycle, long before a fare can be raised to meet it.

Note. The two measured points are counted in days, not weeks, so a price move reaches the cost base within a single fuel cycle.

Where it broke, and who it broke first

That speed shows in the accounts. The industry fuel bill rises nearly 40 per cent to $350 billion, net profit falls from roughly $45 billion to $23 billion, and the margin from 4.2 per cent to 2.0. What makes it a shock rather than a squeeze is the reversal: in December 2025 the same forecast had fuel costs drifting lower, on a consensus that Brent would fall to $62.

Losses that size do not fall evenly. They land first on carriers that stripped every other cost out to compete on price, because jet fuel is the one line they could not strip. Spirit Airlines ceased all flight operations on 2 May, ending two Chapter 11 bankruptcy-protection cases filed less than a year apart; management said the fuel shock removed the liquidity to finish a restructuring that would otherwise have worked.

The next test is already live in Asia. AirAsia Group reported a second-quarter net loss of RM830.5 million, of which RM331.0 million was a foreign exchange loss; fuel expenses rose 58 per cent year on year as jet fuel averaged US$183 a barrel. The group is in discussions for up to USD 1.0 billion in funding (AirAsia Group results release).

Better-capitalised carriers shrank instead. American disclosed a more than $4 billion increase in fuel expense in its first-quarter 2026 filing, United said its fourth-quarter capacity would decline from current published schedules, and Norse Atlantic scrapped its Los Angeles summer programme.

The most counterintuitive casualty is the region closest to the oil. Middle Eastern carriers swing from a combined $7.2 billion profit to a $4.3 billion loss, taking the regional margin from 9.4 per cent to minus 6.1. The Gulf super-connector model flies passengers between two foreign countries through a home hub, maximising fuel burned per passenger. Its hubs also sit beside a disrupted strait.

One thing has not broken. Demand held: a record 84.0 per cent of seats filled and 5.1 billion passengers expected in 2026. The stress is landing on margins and the weakest balance sheets, not on traffic. The failures have therefore been corporate rather than systemic.

Note. In December 2025 the same fuel bill was forecast to fall. The reversal, not the level, is what makes this a shock rather than a squeeze.

Sustainable aviation fuel has the worse dependency

The obvious escape from a refining margin is to stop buying the refined product. Sustainable aviation fuel is meant to be it. It is nowhere near ready: production reaches about 2.4 million tonnes in 2026, 0.8 per cent of jet fuel consumption, at an assumed USD 374 a barrel against USD 152 for conventional jet fuel (IATA), against a 2050 net zero pathway needing around 500 million tonnes a year.

The deeper problem is the raw material. Roughly 80 per cent of capacity upgrades waste fats and used cooking oil into kerosene. The chemistry works; the raw material does not exist. Collection runs at 16 to 20 million tonnes a year against projected demand of 60 to 120 million by 2035, so even if every litre went to aviation it would cover 3 to 8 per cent of 2030 demand.

So the substitute offers no relief. The fossil input is hostage to refinery yield and a refining margin; the mandated clean input is hostage to a finite supply of collected waste fats and a volume deficit that cannot close this decade.

Airline energy risk: resilient aircraft, fragile accounts

The verdict is split. The halves are easy to confuse. Operationally, passenger aviation is robust: the aircraft fly, the crews show up, and demand held against an 18 per cent fare rise. Financially it is exposed, because its biggest variable cost is set in a market it does not participate in, cannot store, and in 2026 could not properly hedge.

What turns a bad year into permanent change is duration, not peak price. A spike is survived on hedges, cash and a season of capacity cuts; a long plateau outlasts the hedge book, drains liquidity and turns suspended routes into retired aircraft, at which point the pre-shock map does not come back even if jet fuel does.

Fleet renewal reduces fuel burn per seat but proceeds slowly; crack-spread hedges are available on a shorter horizon.

The same structure applies to any business that buys a processed product: the price paid includes a conversion margin set by the processor, which can move faster than the underlying commodity.

Note. The two central paths carry 65 per cent between them. The fat tail is unusual. It is fat because two chokepoints are live at once.

Drawn from TheRiskAgent's industry energy risk report on global passenger air transport (September 2026). Figures checked against the issuing official sources in October 2026: IATA, the US Energy Information Administration, the UK government, SAnews and the carriers' own results and filings. Reference material, not advice.