The barrel was never the problem

Energy risk in global passenger air transport: the Iran conflict's closure of the Strait of Hormuz, the Houthi blockade of 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, and talks between Iranian and Gulf officials in Oman on reopening the waterway were postponed indefinitely. That is where this sits today: 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 fresh attacks on tankers. Since late July the Houthis have blockaded the Bab el-Mandeb at the other end of the route to Europe. On 6 September, six ships passed through a waterway that normally carries about 85 a day.

This is the largest supply disruption in the history of the oil market, and it is still running. Jet fuel stood at $4.28 a gallon in early September, up 71 per cent since the war began. Brent crude, the global oil benchmark, was around $104.61 on 11 September, having ranged from $58.66 last December to $120.88 on 30 April.

For airlines the story then seems to write itself. They 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, and the remedy looks obvious: buy the fuel forward. Ryanair is the apparent proof, entering the year roughly 80 per cent hedged at about $668 a tonne while the European market ran nearer $1,300.

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 it 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; this year it is forecast to average a historic $57, and the Asian assessment touched $144.

Most carriers hedged the first price and left the second open. So the defining exposure of the year 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 it 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, which is why this war 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, and the mid-June ceasefire produced the year's only real relief, 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. The Houthi blockade at the Bab el-Mandeb threatens 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 oil-market history begins
30 Apr 2026	Brent hits a 52-week high of $120.88	Hormuz traffic near 5 per cent of the pre-war average
2 May 2026	Spirit Airlines ceases all flight operations	A second Chapter 11 inside a year ends in liquidation
7 Jun 2026	The 2026 industry profit outlook is halved	Fuel bill revised from $252bn to $350bn
17 Jun 2026	A US and Iran ceasefire reopens the strait	The year's only sustained relief; it lasts weeks
Early Jul 2026	The arrangement breaks down after attacks on tankers	United trims about 5 per cent of capacity
Late Jul 2026	Houthis declare a Bab el-Mandeb blockade	A second chokepoint opens on the route to Europe
6 Sep 2026	Six ships transit Hormuz against roughly 85 normally	Jet fuel $4.28 a gallon, up 71 per cent since the war began
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 is thinning on schedule: IAG from 75 per cent in the first quarter of 2026 to 39 per cent in the first of 2027, easyJet from 84 to 62, Wizz Air from 83 to 55. Replacement cover must be bought at today's prices, and 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. The Houthi blockade at the Bab el-Mandeb threatens the other end of the route to Europe. This is the trigger that moves everything else here, and the severe-disruption path carries a 30 per cent weight.

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. A substation fire closed Heathrow for a full day in March 2025, taking out the backup generator too.

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, and 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 twice conventional kerosene, with penalties at twice that gap. A rule requiring carriers to uplift at least 90 per cent of annual fuel at each qualifying European airport stops them flying in cheaper fuel. Last, because it is a cost rather than a cliff.

Fuel hedge cover entering the shock, and where it goes next

Carrier	Cover entering 2026	Where it goes	What that means
Air France-KLM	about 87 per cent, one year out	Lifted during the year	Among the best protected in Europe
easyJet	84 per cent of H1 at $715 a tonne	62 per cent in H2 2026	Chief executive flagging fare rises
Wizz Air	83 per cent to March 2026	55 per cent thereafter	Roughly 50m euros of profit at risk
Ryanair	about 80 per cent at $668 a tonne	Held through FY2026-27	Bought at half the market price
Lufthansa	about 77 to 82 per cent	New hedging halted	EBITDA impact near minus 17 per cent
IAG	75 per cent in Q1 2026	50 per cent by Q4, 39 per cent in Q1 2027	The steepest disclosed roll-off
US majors	Programmes closed in 2025	No cover	Met the shock at spot prices
AirAsia	Little to none	Now exploring a hedge	Fully exposed; RM831m Q2 loss, seeking $1bn

Note. This is the one risk in the piece with a date on it. The cover is disclosed, it is dwindling, and it cannot be replaced at the prices that bought it.

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, and 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, and refiners in Europe, North America and West Africa lifted their kerosene yields to plug the hole. That reallocation is slow and finite, which is why jet fuel 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 half the price of a tank of jet fuel. The other half is the refiner's margin, and that is the half almost nobody insured.

The industry that cannot keep a week's jet fuel

That margin would matter less if the industry could wait a price spike out. 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, and 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, and 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. Almost every measured point sits below the line at which refuelling starts to fail. An industry this thin on cover has no time to argue with a price.

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, Southeast Asia's largest low-cost carrier, reported a second-quarter loss of about 831 million ringgit (roughly $185 million) as its fuel bill jumped around 66 per cent in the quarter, and it went into the second half seeking up to $1 billion abroad, having held about 954 million ringgit in cash against 18.4 billion ringgit of current liabilities at the end of June. In mid-September, Reuters reported, citing sources, that Malaysia's government had asked two rival airlines whether they could absorb AirAsia's domestic flights and had hired a consultant to review its finances: contingency planning, not a rescue, but a measure of how far the same fuel shock has pushed a far larger discount carrier.

Better-capitalised carriers shrank instead. American warned of more than $4 billion in added fuel costs and cut guidance twice, United removed about 5 per cent of planned capacity, 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. Proximity is no hedge: the Gulf super-connector model flies passengers between two foreign countries through a home hub, maximising fuel burned per passenger, and its hubs sit beside a disrupted strait.

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

Note. Nine months earlier 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, and sustainable aviation fuel is meant to be it. It is nowhere near ready: production reaches about 2.4 million tonnes this year, 0.8 per cent of jet fuel consumption, at three to ten times the price, against a 2050 net zero pathway needing around 500 million tonnes a year.

The deeper problem is what it is made from. 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 one dominant supplier country and a volume deficit that cannot close this decade. That is a swapped dependency, not a hedged one.

Airline energy risk: resilient aircraft, fragile accounts

The verdict is split, and 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 one of the most fragile large industries there is, because its biggest variable cost is set in a market it does not participate in, cannot store, and this year could not properly hedge. The fleet is fine. The profit and loss account is not.

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.

The change that would most improve resilience is neither a new fuel nor a new aircraft. Fleet renewal is the most durable answer and the slowest, saving around 20 per cent per seat on fleets that turn over a few per cent a year. The fast answer is duller and nearly free: hedge the differential, not just the barrel.

Which leaves a question worth asking outside aviation. Every business buys something processed, and somewhere between the commodity you watch and the product you take delivery of sits a margin that belongs to someone else, that you have never priced, and that can move faster than anything on your own cost sheet. The airlines that lost most this year were not the ones that failed to see the war coming. They insured the wrong number. Do you know which number yours is?

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

Figures drawn from TheRiskAgent's industry energy risk report on global passenger air transport (September 2026): IATA forecasts and fuel fact sheets, EIA and IEA outlooks, S&P Global price assessments, carrier disclosures and specialist trade reporting. Produced with AI research tools and reviewed before release. Reference material, not advice.