The Middle East conflict is forcing a fundamental restructure of global air cargo networks. March 2026 saw spot rates climb to USD 2.86 per kilo globally, whilst regional capacity dropped 30% below pre-conflict levels. The hit during peak tender season, accelerating a shift from annual contracts to three-month agreements as shippers prioritised flexibility over long-term commitments.
Unlike previous supply chain crises where air freight absorbed overflow from congested ocean routes, this conflict strikes directly at air cargo infrastructure. Dubai and Doha, strategic midpoints connecting the Americas, Asia and Europe, transformed from advantages into vulnerabilities. Carriers redirected operations to Muscat and Jeddah to maintain supply chain continuity.
Capacity Crunch Drives Rate Volatility Across Key Lanes
Middle Eastern carriers control roughly half of all capacity on Asia-Europe corridors. When conflict reduced their operations, the knock-on effects rippled across global networks. Spot rates from South Asia and Southeast Asia to the Middle East jumped 50-100% in the week ending 29 March compared to four weeks prior. Europe-Africa corridors registered 31% rate growth during the same period.
The share of global volumes shipped under spot rates climbed three percentage points to 52% in March. Shippers moved meaningfully towards three-month agreements during Q1 2026, abandoning the predictability of annual contracts. The pricing environment reflects multiple converging pressures: severe capacity shortages, jet fuel costs that nearly doubled and newly added war-risk surcharges.
“Airfreight rates are going up, and we already see evidence of the Middle East conflict reshaping global airfreight pricing, but, for shippers, cost is only one of the variables. Protecting market share and service to customers also plays an important role,” said Niall van de Wouw, Xeneta’s Chief Airfreight Officer.
E-Commerce Growth Maintains Air Freight Demand Despite
E-commerce expansion remains a critical force shaping air cargo demand. Online marketplaces and international retailers depend on air freight to transport high-value, time-sensitive goods. Electronics, fashion products and high-demand consumer goods flow through air networks that consumers expect to deliver faster transit times.
Air freight growth forecasts remain in low single digits for 2026, reflecting both the structural demand from e-commerce and the headwinds from geopolitical. The industry adapts through investments in digital technologies, automation and improved tracking systems. Real-time shipment visibility becomes essential as routes grow more complex and unpredictable.
“Shippers are now looking into flexibility, transparency, and those expectations are not going away anytime soon,” said Guillermo Ochovo, Director of Cargo Facts Consulting. The demand for transparent, trackable shipments aligns with e-commerce requirements where end customers track parcels from warehouse to doorstep.
Ocean and Ground Freight Face Separate Pressures
Whilst air cargo wrestles with capacity constraints and surging rates, ocean shipping heads towards continued overcapacity. Ocean capacity will increase 3.7% in 2026, adding 1.5 million TEUs to the market. Growth accelerates to 8% in 2027, following 7% expansion in 2025. Shippers gain negotiating, particularly on Transpacific eastbound lanes.
Ground parcel rates tell a different story. The TD Cowen/AFS Freight Index projects Q1 ground parcel rates 38.9% higher than the January 2018 baseline, representing 5.4% year-over-year growth. FedEx and UPS rate and surcharge increases push transportation costs into the top three expenses for many businesses.
“The pricing environment right now is still very, very favourable for shippers. It does take a little longer and take a little more effort to get concessions than it did the last few years, but they’re still out there to be had,” said Kenneth Moyer, Partner and Chief Supply Chain Officer at LJM Group.
Rail Consolidation and Trucking Survivability Shape Land Transport
A potential Union Pacific-Norfolk Southern merger would create the first U.S. transcontinental railroad, connecting more than 50,000 route miles. The Surface Transportation Board temporarily denied the merger application for missing information, but the proposal signals possible consolidation in rail freight.
“With inventories leaner, shippers are placing more value on reliable, cost-effective transportation, which directly affects rail traffic patterns,” said Rand Ghayad, Chief Economist and Senior VP of Policy and Economics at the Association of American Railroads.
Trucking faces viability concerns as slim margins and inflation threaten carrier survival. Several carriers filed bankruptcy in recent months, including Texas International Enterprises, STG Logistics and Bulmaks. “I just think the survivability of this current market diminishes substantially,” warned Dean Croke, Principal Analyst at DAT iQ. The industry focus shifts from rock-bottom rates to reliable capacity and carrier health.
Trade Policy Volatility Forces Strategic Network Planning
Tariffs, export controls and evolving trade regulations alter cross-border shipping economics. Air cargo networks grow increasingly complex as fluctuating trade policies redirect demand to multi-hub networks. Airlines and logistics providers invest in digital technologies and advanced analytics to navigate regulatory uncertainty.
“I think now it’s clear for everybody that you cannot avoid the – it will come your way. But it’s about continuing to deliver when becomes the norm, which is now the case today,” said Guillaume Bournisien, Managing Director of Freight Forwarding in the U.S. and Canada at Geodis.
Shippers require more strategic planning and scenario modelling. The traditional approach of locking in annual contracts at fixed rates no longer matches market volatility. Three-month agreements provide flexibility to adjust as geopolitical situations evolve.
Industry Solidarity Emerges Amid Uncertainty
Despite rate volatility and capacity constraints, relationships between shippers, forwarders and airlines show resilience. “Right now, we can see a lot of solidarity and trust between shippers, forwarders, and airlines to get goods moved. We see businesses respecting contracts as much as they can and sticking to what they have agreed as they wait to see what unfolds,” said van de Wouw.
The industry recognises that whilst the impact of conflict sits beyond their control, collaboration helps navigate. “There is clearly a lot of concern and unanswered questions about the market outlook, but we also see a current transparency and maturity in customer and supplier relationships, and a sense of solidarity that although the impact of the conflict is beyond their control, they will get through it together,” van de Wouw added.
Xeneta recommends postponing tenders during present uncertainty. “What is the value of making a longer-term commitment now when the whole backdrop can change so quickly?” van de Wouw asked. The advice reflects broader industry thinking: flexibility trumps predictability when geopolitical landscapes shift rapidly.
Cargo Solutions Network Perspective: Quote Fast, Ship Smart
Multi-leg routing and carrier comparison matter more than ever. When traditional Middle East hubs face capacity constraints and rate surges hit specific corridors, forwarders need tools to quote alternative routings quickly. The ability to compare airport-to-airport and door-to-door options across multiple carriers in one workflow determines whether you win or lose business.
SME forwarders compete with enterprise players who have dedicated teams monitoring geopolitical developments and adjusting routing strategies. Access to live rates, vetted partners and instant comparison tools levels that playing field. Quote in minutes, not hours. Present clients with options that account for both cost and reliability.
Frequently Asked Questions
Why are air cargo rates increasing in 2026?
Air cargo rates increased due to multiple factors: the Middle East conflict reduced regional capacity by 30%, jet fuel prices nearly doubled, and war-risk surcharges were added. Global spot rates reached USD 2.86 per kilo in March 2026, with South and Southeast Asia to Middle East routes seeing 50-100% rate surges. Capacity constraints on Asia-Europe corridors, where Middle Eastern carriers control half of all capacity, amplified rate pressure across global networks.
How is e-commerce affecting air freight demand?
E-commerce drives air freight demand as online retailers require fast, reliable transport for high-value, time-sensitive goods including electronics and fashion products. Consumers expect rapid delivery times, pushing retailers towards air freight over slower ocean shipping. Despite geopolitical disruptions, air freight growth forecasts remain in low single digits for 2026, sustained by e-commerce structural demand and cross-border retail expansion.
Should shippers sign annual contracts or shorter agreements in 2026?
Industry experts recommend shorter agreements during current volatility. Shippers moved meaningfully towards three-month contracts in Q1 2026, abandoning annual commitments. Xeneta’s Chief Airfreight Officer advises postponing tenders during uncertainty, asking what value longer-term commitments offer when geopolitical and economic backdrops change rapidly. Flexibility allows shippers to adjust as situations evolve rather than locking rates that may quickly become uncompetitive.
What is happening with ocean freight capacity in 2026?
Ocean shipping capacity increases 3.7% in 2026, adding 1.5 million TEUs to the market, creating continued overcapacity. Growth accelerates to 8% in 2027. This overcapacity gives shippers in contract rate negotiations, particularly on Transpacific eastbound lanes. The ocean freight environment contrasts sharply with air cargo, where capacity constraints drive rate increases.
How are Middle East hubs being affected by the conflict?
Dubai and Doha, strategic midpoints connecting Americas, Asia and Europe, transformed from geographic advantages into vulnerabilities. Air cargo capacity in the Middle East region remains roughly 30% below pre-conflict levels. Carriers shifted operations to alternative locations including Muscat and Jeddah to maintain supply chain continuity. The particularly affects Asia-Europe corridors where Middle Eastern carriers historically provided half of all capacity.
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