The International Air Transport Association (IATA) has warned that global jet fuel supplies will take months to replenish, even if the Strait of Hormuz remains safely reopened following the recently announced two-week ceasefire between Iran and the US.
The closure of the Strait, part of Iran’s retaliatory measures, has choked global jet fuel supplies and triggered significant across the aviation sector. While crude oil prices fell below $100 per barrel following news of the ceasefire, the path to stable jet fuel availability remains long and complex.
The Scale of the
Willie Walsh, IATA Director General, delivered a sobering assessment of the recovery timeline. Despite the diplomatic breakthrough, damaged infrastructure and disrupted refining capacity across the Middle East mean supply chains cannot simply restart overnight.
“If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the to the refining capacity in the Middle East.”
– Willie Walsh, IATA Director General
The impact on airline economics has been severe. Fuel typically accounts for about 27% of operating expenses for air carriers, making it the second-largest cost after labour. Jet fuel prices have more than doubled since the Iran conflict began, even as crude prices rose 50% before the ceasefire announcement.
Regional Impact and Airline Response
Airlines across Asia have been forced to implement immediate operational changes to manage the fuel supply crisis:
- Cutting flight frequencies on key routes
- Carrying extra fuel from home airports to reduce reliance on affected refuelling points
- Adding technical stops for refuelling on longer routes
- Rerouting services to avoid fuel-constrained airports
Gulf carriers, which accounted for 14.6% of international capacity last year, have been particularly affected. Walsh acknowledged that while airlines outside the region will absorb some capacity, they cannot fully replace the scale provided by Middle Eastern hubs.
“Some of that capacity will be replaced by airlines outside of the region… but there’s no way they can replace the (entire) capacity that was provided by the Gulf carriers.”
– Willie Walsh
Export Restrictions Tighten Regional Markets
The crisis has triggered a wave of protectionist measures across Asia as countries prioritise domestic supply:
- China and Thailand have halted jet fuel exports completely
- South Korea has capped jet fuel shipments at last year’s levels
- Lower-income, import-dependent markets in South and Southeast Asia face the most acute shortages
These restrictions have created additional pressure on airlines operating in regions already struggling with supply constraints, particularly affecting carriers with weaker balance sheets.
Market Recovery: A Measured Timeline
Walsh drew comparisons to previous aviation crises to frame expectations for recovery, but was clear this situation differs significantly from the COVID-19 pandemic.
“This is not similar to COVID. This is not a crisis anywhere close to what we experienced (in COVID). In COVID, capacity reduced by 95 per cent because borders closed. We’re nowhere near that.”
– Willie Walsh
The recovery depends on three critical factors: sustained reopening of Hormuz, reliable crude supply to refineries, and time for facilities to rebuild capacity and resume normal operations.
Alternative Refining Capacity Offers Hope
While Middle Eastern refineries struggle to return to normal operations, Walsh pointed to alternative refining capacity that could help bridge the gap. India and Nigeria have capacity to increase refined product output in the interim, providing some relief once crude oil flows resume.
The elevated crack spreads-the margin between crude oil and refined jet fuel prices-create strong financial incentives for refiners worldwide to increase jet fuel production once stable crude supply is restored.
“So there is (refining) capacity available once we get the crude oil flowing, but it’ll take a little bit of time, and with the crack spread elevated the way it is, I think that provides an incentive for refineries to increase the production of jet fuel.”
– Willie Walsh
Airline Stocks Rally on Ceasefire News
Despite the cautious outlook on supply recovery, airline stocks across Asia surged following the ceasefire announcement:
- Qantas Airways jumped more than 9%
- IndiGo soared as much as 10%
- Cathay Pacific climbed 5%
- Air New Zealand rose over 4%
The market response reflects investor confidence that the worst of the crisis may be behind the sector, even as operational challenges persist.
Gulf Hubs: Confidence in Recovery
Despite the current, Walsh expressed confidence that Gulf carriers and their hub operations will bounce back once supply chains stabilise.
“I fully expect the Gulf hubs to recover and recover quickly.”
– Willie Walsh
However, the timeline remains measured. The two-week ceasefire offers hope, but crude supply relief won’t immediately translate to refined product availability. Refineries require time to restart operations safely, rebuild inventory, and restore distribution networks.
What This Means for Cargo Solutions Providers
The jet fuel supply crisis and resulting flight reductions have direct implications for air cargo capacity. Fewer passenger flights mean reduced belly-hold cargo space on key trade lanes, particularly affecting routes served by Gulf carriers.
Freight forwarders must adapt to reduced capacity and potential route changes. Multi-carrier comparison and flexible routing options become essential tools for maintaining service levels while managing cost pressures from elevated fuel surcharges.
The crisis underscores the importance of having instant access to alternative routing options and real-time capacity visibility across multiple carriers and service modes. As airlines adjust networks and schedules in response to fuel availability, cargo solutions providers need agile tools to quote and book complex, multi-leg routes quickly.
The path to recovery is clear but not immediate. Sustained diplomatic progress, reliable crude flows, and time for infrastructure recovery will all play crucial roles in returning jet fuel supply to normal levels over the coming months.
