US Airlines Hit by 15% Jet Fuel Surge After Iran Attacks

US airlines are facing rising fuel expenses after oil prices increased following US-Israel strikes on Iran, exposing carriers that no longer hedge fuel costs to potential margin pressure if the conflict persists. According to Reuters, jet fuel prices have risen 15% over the past week, adding pressure to an industry already dealing with operational disruption, including more than 20,000 flight cancellations and thousands of stranded passengers linked to the expanding conflict.

Fuel is the second-largest expense for airlines after labor and typically accounts for between 20% and 25% of operating costs. Over the past two decades, US airlines have largely abandoned hedging strategies designed to protect against fuel price volatility. Hedging uses derivative contracts to lock in fuel prices, allowing companies to mitigate the impact of sudden price spikes.

Most large US carriers ended this practice after previous hedging contracts generated losses when oil prices declined. Southwest Airlines, which had been the most active hedger among US carriers, discontinued the strategy in 2025, stating that hedging had become costly and unreliable.

By contrast, airlines in Europe and Asia continue to maintain hedging programs. Carriers such as Air France-KLM and Cathay Pacific still manage active hedging portfolios to reduce exposure to fuel price volatility.

Without hedging, US carriers are more exposed to sustained increases in jet fuel prices. Average jet fuel prices currently stand at US$2.83 per gallon, according to the Oil Price Information Service. Spot jet fuel prices on the US Gulf Coast reached US$4.12 per gallon on Mar. 2, the highest level since June 2022, according to data from Platts, a unit of S&P Global.

Airlines have outlined how fuel price fluctuations directly affect operating costs. Delta Air Lines said in a regulatory filing that a one-cent increase in the price of jet fuel per gallon would raise its annual fuel expenses by about US$40 million. For American Airlines, the same increase would add approximately US$50 million in annual costs, while Southwest Airlines estimated a US$22 million increase.

American Airlines said its higher fuel consumption reflects the scale of its operations. A company spokesperson said the airline used about twice as much fuel as Southwest in 2025, noting that this is “a product of our fleet size and overall level of flying versus Southwest.”

Rising fuel costs are already affecting earnings expectations. Analysts at TD Cowen estimated that United Airlines could report earnings per share between US$0.05 and US$0.22 for the March quarter at current fuel prices. This compares with the airline’s January adjusted earnings forecast of US$1 to US$1.50 per share.

United declined to comment on the estimate, but CEO Scott Kirby said on CNBC that higher fuel prices would have a “meaningful” impact on the airline’s quarterly results.

If jet fuel prices remain elevated throughout the year, the four largest US carriers—Delta, American, United and Southwest—could face a combined US$5.8 billion increase in fuel expenses, according to Reuters calculations.

Analysts say airlines may attempt to offset higher costs through ticket pricing. Morgan Stanley analyst Ravi Shanker said he expects US carriers to continue avoiding hedging strategies. “I’m pretty convinced the airlines are going to remain unhedged in the United States and look to pass through the costs to end consumers, only if needed in the event of sustained fuel inflation,” he said.

Airlines that rely more on premium cabins and corporate travel may have greater flexibility to increase fares. Carriers that operate primarily in competitive domestic markets could face more difficulty adjusting prices.

For example, Alaska Air Group and JetBlue Airways rely more heavily on domestic routes with price-sensitive travelers. American Airlines also serves a large share of leisure passengers, and its network includes many short-haul flights, which consume more fuel due to frequent takeoffs and landings.

Delta has one structural advantage compared with other US airlines. The company operates a refinery in Pennsylvania with a capacity of about 190,000 barrels per day, supplying nearly three-quarters of its fuel consumption. The refinery allows Delta to avoid paying refining margins charged by external suppliers, although it does not protect the airline from changes in crude oil prices.

The escalation of conflict in the Middle East on Feb. 28, 2026 has disrupted global energy flows and highlighted vulnerabilities in jet fuel supply chains. The Strait of Hormuz, which normally carries about 20% of global oil supply, has seen tanker traffic decline by an estimated 70–80%. 

Europe is among the regions most exposed to supply interruptions. Between 25% and 30% of its jet fuel demand is supplied from the Persian Gulf.

Jet fuel security in Europe relies largely on commercial inventories that typically cover slightly more than one month of demand. Alternative supply sources also face constraints. About 84% of crude oil moving through the Strait of Hormuz is normally destined for Asian markets, limiting the volume available for other regions if flows are redirected. In addition, higher war-risk insurance costs and longer shipping routes around the Cape of Good Hope are extending delivery times and increasing transportation expenses, adding pressure to global aviation fuel supply chains.