Is the deal real? While we await the outcome of the latest round of Strait of Hormuz discussions, the aviation industry awaits a meaningful outcome that will get jet fuel supplies back to normal.
The impact of the closure of the straits has differed from continent to continent and indeed from country to country.
And getting the supply restarted is not that simple. It takes time. Restarting depends partly on how long the supply has shut down. It takes time to restart an oil well. It takes a couple of weeks at least to restart a refinery. And even when the tanks start filling up, there are also the missile attacks and the damage to some of this infrastructure which will take time to repair.
Eleanor Budds of Standard & Poor told the IATA congress in Rio de Janeiro that essentially every day that the crisis goes on, energy supply is lost from the market. Crude production in the Middle East Gulf is shut in. Not all of it and not all crude production, but a substantial amount of crude and refining production of products is shut in. This means that the product is not being produced. It is not just not leaving the Gulf. It is not actually entering the market. It is not existing. If a barrel of oil is not produced, it stays in the ground. And the longer that goes on, the more the market loses. Every single day brings more loss from the market.
The situation reveals the scale of the challenge ahead for airlines and fuel suppliers alike. Aviation relies on steady flows of jet fuel derived from refined crude.
Operators in Africa and Asia in particular report pressure on routes that depend on reliable energy inputs from the Gulf region. Vietnam Airlines, Cebu Pacific, Batik Air Malaysia, Ethiopian Airlines, and Kenya Airways were forced to cancel routes. In Myanmar they’ve tried to reduce traffic by 50pc. In the Philippines ther was huge impact in terms of the economy.
Ethiopian cancelled more than 100 weekly flights, disrupting travel for over 50,000 passengers. Shanghai Airlines scrapped a leading number of regional flights, contributing to over 13,000 flight cancellations across the Asia-Pacific theatre. Rano Air Nigeria temporarily suspended several domestic routes after aviation fuel costs in Nigeria spiked by over 300%, rendering flight paths commercially unviable. RwandAir and Air Tanzania disrupted and partially suspended services linking East Africa to major Middle Eastern transit hubs. Royal Air Maroc systematically eliminated its lowest-performing regional and international connections to manage the oil shock.
Air India and Indigo were forced into severe schedule disruptions and costly “tankering” operations, such as adding unscheduled refuelling stops in Kolkata on routes from Yangon, due to localized fuel exhaustion at destination airports. The differences in impact arise because some countries hold strategic reserves while others operate with tighter margins and greater exposure to imported fuels.
In Europe, despite the soundings form the energy commissional, fuel supply was never a serious concern. Ireland has little or not storage capacity for jet fuel, but that is not a risk because of our easy access to Wales. Our supply lines were uninterrupted, as we sourced more of our fuel from the USA.
Eleanor Budds raised further serious questions at the IATA Congress about the timelines involved in any recovery. It takes probably two months for crude production to ramp up and five months to get back to where it was before. Imagine the process starts with crude production. Tankers then move if insurance allows. Insurance can allow movement but the price will be very high to move those cargoes. Once out, it takes seven weeks to get some of that crude to Asia. It takes two weeks to refine it into products and then a week or so more to distribute those products.
Much supply has been lost from the market already. On top of that a risk premium applies. The market reacts to fundamentals of supply and demand and it reacts to risk. At the beginning the supplies were still coming but the market reacted to the risk perception that those supplies would stop and that volatility followed. The crude price always reacts to sentiment and risk in the market. Such dynamics push costs higher for jet fuel and create uncertainty for long term planning in aviation.
Airlines have already absorbed initial shocks through hedging where possible and adjustments in operations. Ryanair and Aer LIngus are relatively unaffected as they are both well hedged for 2026, whatever about 2027. Prolonged disruption tests the resilience of carriers large and small. Fuel represents a major portion of operating expenses. Increases flow through to ticket prices and affect passenger demand in price sensitive markets. Cargo operations also face pressure as reliability of delivery times declines with fuel availability in question.
Alternative routes extend transit times and raise expenses further. Tanker traffic must navigate longer paths around affected zones which adds to insurance costs already elevated by the risk premium. Repair of damaged infrastructure compounds the timeline. Missile attacks have targeted facilities in ways that require specialist work and importation of materials. Each element extends the period before normal flows resume.
Ms Budds pointed out the permanent loss aspect during the IATA congress. Production not realised in the present period cannot be recovered later. Oil left in the ground represents forgone revenue for producers and forgone supply for consumers. This reality shapes negotiations in the Strait of Hormuz discussions. Participants seek paths to reopen flows but must address security concerns that led to the initial closure. Progress remains uncertain as talks continue.
What to do? Restarting the supply chain is easier said than done. Some producers outside the Gulf region increased output to offset losses but such measures offer only partial relief. Refineries in Europe and Asia operate at adjusted rates to process whatever crude reaches them. The distribution chain from refinery to airport storage requires its own sequence of steps each vulnerable to delays.
The risk premium embedded in prices reflects genuine concerns over future stability. Even if a deal emerges markets will price in the possibility of renewed interruptions. This perception sustains elevated costs for jet fuel over months. Airlines must balance these expenses against efforts to maintain service levels. Passengers experience the effects through fare adjustments while freight customers see changes in logistics costs.
A meaningful outcome to the on-again off-again ceasefire would ease pressures but the path to normal supplies involves multiple stages each with its own requirements. Restarting wells and refineries demands technical readiness and security assurances. Repair of damaged sites extends the overall period. Insurance for tanker movements at higher rates influences the economics of resumed trade.
Meanwhile the market continues to react to both actual supply data and risk perceptions. Crude oil prices dropped to a 3.5-month low down to roughly $73.16 per barrel on Thursday, before staging a partial recovery to the $75.35 range on Monday. Fundamentals drive part of the price while sentiment influences volatility. The combination creates conditions that challenge planning across the aviation sector. Carriers prepare contingencies but recognise that full restoration follows the extended timelines confirmed by experts. Despite this the forward price for 2027 remains stable, generally ranging between $60 and $75 per barrel.
Another peculiarity to emerge from the crisis: there is jet fuel in storage at the decommissioned refinery in Whiddy. Can this be released and rendered fit for use? The question should have been raised in these uncertain times.
The risk premium persists as long as uncertainty remains.
