Jet fuel retreats and Hormuz reopens: the end of a 16-week fuel shock

Jet fuel prices are retreating, airspace is reopening, and the Strait of Hormuz is (hopefully) returning to normal.

The announcement of a US-Iran agreement and the expected normalization of traffic through the Strait of Hormuz may mark the beginning of the end of one of the most significant fuel shocks the aviation industry has faced.

Over the past 16 weeks, jet fuel prices surged from $99/bbl to a peak of $209/bbl, while crack spreads reached levels never seen in modern aviation history. The result was a dramatic deterioration in industry profitability, prompting IATA to cut its 2026 net profit forecast by 44%.

The interesting story, however, is refining margins.

While Brent crude has already begun to retreat, the real driver of airline cost inflation was the expansion of jet fuel crack spreads, which at one point exceeded $86/bbl. As supply chains normalize and geopolitical risk premiums ease, refining margins are now falling faster than crude prices.

For airlines, this should provide welcome relief on fuel costs and help restore some of the profitability lost since the conflict began.

For airports, the implications are equally important. Healthier airline economics improve route viability, support capacity growth and strengthen the outlook for passenger traffic, commercial revenues and future investment decisions.

The episode is also a reminder of a broader industry truth: Aviation demand remains remarkably resilient. The challenge is rarely traffic. More often, it is the industry's exposure to external shocks that determines whether record revenues translate into acceptable returns.

The fuel shock may be easing. However, the industry's structural challenge of creating value above its cost of capital remains.

For a longer-term perspective on how fuel cycles translate into airline profitability and value creation (2015-2026) refer to the article in the comments.

(This write-up is for educational/informational purposes only; happy to amend inaccuracies, if any. Views are personal.)

#Aviation #Airlines #Airports #IATA #JetFuel #AirlineEconomics #Strategy