Brent crude briefly topped US$119 a barrel on Sunday before pulling back to US$91 on Tuesday, but with the Strait of Hormuz still effectively closed and jet fuel at record highs, airlines are warning that airfares could rise.
One week after the U.S.-Israeli strikes on Iran triggered a near-total shutdown of shipping through the Strait of Hormuz, the jet fuel situation Karryon reported on seven days ago has escalated sharply. Oil prices remain wildly volatile and well above pre-conflict levels, and the impact on airfares is evolving.
Brent crude surged more than 30 per cent on Sunday, briefly touching US$119 a barrel (approximately A$169), Al Jazeera reported. It was the first time oil had exceeded US$100 a barrel since Russia’s invasion of Ukraine in 2022.
By Tuesday, the price had pulled back to around US$91 a barrel (A$129), but that still represents a roughly 25 per cent increase since the conflict began on 28 February, when Brent sat at approximately US$73.
Singapore jet fuel prices hit an all-time high of US$231.42 a barrel (A$328) on 5 March, according to S&P Global Platts. In the US, jet fuel has jumped from roughly US$2 a gallon (A$2.84) to approximately US$4 a gallon (A$5.68) in the space of two weeks.
Why has the oil price spiked further this week?
The Strait of Hormuz, which handles approximately 20 per cent of global oil supply and nearly 20 per cent of the world’s daily jet fuel, has effectively ground to a halt.
On 5 March, Iran’s Revolutionary Guard Corps announced it would keep the strait closed to ships from the U.S., Israel and Western allies, while allowing passage for others. A handful of vessels have since transited under those terms, CSIS reported, but volumes remain a fraction of normal levels.
Qatar’s Energy Minister Saad al-Kaabi warned prices could reach US$150 a barrel (A$213) if disruptions continue, while Iran’s Revolutionary Guard has threatened US$200 a barrel (A$284).
What does this mean for airfares?
The short answer: they are going up. The question is how fast and by how much.
According to Skift, the oil shock could cost US airlines US$24 billion (A$34 billion) in additional jet fuel expenses, with average airfares needing to rise at least 11 per cent to offset the increase.
United Airlines chief executive Scott Kirby told CBS News that the spike would have a “meaningful” impact on the carrier’s profitability, and that increases in passenger ticket costs would “probably start quick.”
Some carriers have already begun adding fuel surcharges to long-haul international routes, CBS News reported. Premium tickets in business and first class are seeing increases first, with basic economy and discount coach less immediately affected.
Commodities analyst James Noel-Beswick described the situation as “stratospheric moves in global jet pricing,” CBS News said.
How exposed are Australian airlines?
Qantas has hedged about 81 per cent of its fuel needs for the second half of its financial year to June 2026. That hedging provides a buffer against the most immediate price shock, but formal surcharge revisions are expected in April or May for second-half 2026 departures.
The airline has confirmed its Perth-London service bypasses Middle Eastern airspace entirely via the south polar route. However, Qantas, Singapore Airlines, and Cathay Pacific are all adding 60 to 90 minutes of flying time per flight to avoid Gulf airspace, meaning more fuel is burned at higher prices.
Morningstar equity analyst Nicole Lim said the sell-off in Asian airline shares “reflects market concerns over higher fuel costs, flight cancellations, and incremental costs from rerouting flights following airspace and airport closures.”
What about petrol prices at home?
The ACCC said on 6 March it is monitoring fuel price movements and market behaviour, and has written to major fuel companies setting out its expectations.
ACCC Commissioner Anna Brakey said the regulator “will not hesitate to take action if representations and market behaviour by a petrol company contravene competition and consumer laws.”
Analysts say petrol prices could jump by around 40 cents a litre, adding roughly $24 to the cost of filling a 60-litre tank.
Australia’s fuel reserves remain well below the International Energy Agency’s recommended 90-day minimum, with an estimated 36 days of petrol, 34 days of diesel and 32 days of jet fuel at the start of 2026, Sheep Central reported, citing figures presented to Parliament.
How bad could it get?
That depends on how long the Strait of Hormuz remains effectively closed. Every one-cent-per-gallon increase in U.S. jet fuel costs Delta Air Lines US$40 million (A$57 million), American Airlines US$50 million (A$71 million) and Southwest Airlines US$22 million (A$31 million) annually, One Mile at a Time reported.
Critically, no major U.S. airline hedges its fuel costs. A 25 per cent increase in oil prices would essentially eliminate United Airlines’ entire annual profit of just over US$3 billion (A$4.3 billion), based on its 2025 fuel bill of more than US$11 billion (A$15.6 billion).
The honest answer is that nobody knows. The oil price has swung nearly US$50 in 10 days. Iran, the US, Israel, OPEC members, shipping insurers, airlines and fuel traders are all making moves that affect the next price point, and none of them are coordinating.
What is clear is that every day the Strait of Hormuz remains effectively closed, the pressure on jet fuel costs builds. And airlines have repeatedly shown that those costs are passed on to passengers.
KARRYON UNPACKS: Jet fuel has hit record highs, and airlines are flagging increases to airfares that could land within weeks. For travel advisors, the practical move right now is to lock in fares where possible, flag rebooking risk on flexible itineraries through the Middle East, and have upfront conversations with clients about the likelihood of fuel surcharges appearing on long-haul international tickets from April onward.
