Impact of U.S.-Israel Attacks on Iran: Rising Airfare and Jet Fuel Prices

The recent U.S. and Israeli military actions against Iran have led to a significant increase in jet fuel prices, which in turn is driving up airfare costs globally. Since the attacks began on February 28, 2026, jet fuel prices have surged, with U.S. prices rising from approximately $2.44 per gallon to $3.78 per gallon, marking an increase of over 60%. This spike has prompted several airlines, including Cathay Pacific, Qantas, and Air New Zealand, to announce fare hikes and increased fuel surcharges. Cathay Pacific's CEO, Ronald Lam, indicated that the airline would raise surcharges due to unhedged fuel costs, while Air New Zealand has adjusted its financial outlook in light of the volatile fuel market.

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Airlines are facing acute financial pressure as jet fuel constitutes a significant portion of their operating costs, accounting for about 20% of expenses. Analysts predict that the most severe financial impacts will be felt within the next 30 to 90 days, as airlines had previously booked flights at lower fuel prices. United Airlines CEO Scott Kirby noted that higher fares are likely inevitable, although strong travel demand may provide airlines with some pricing power. However, if demand falters due to increased fares, airlines may need to reduce flight capacity.

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The ongoing conflict has constrained airspace and disrupted flight schedules, leading to a decrease in available flights. More than 46,000 flights have been canceled since the onset of the conflict, further driving up demand and prices. Experts advise travelers to book flights early to avoid potential fare increases of up to 30%. Rico Merkert, a transport professor at the University of Sydney, suggested that while immediate bookings may be more expensive, waiting could be beneficial if the conflict resolves quickly.

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Critics argue that airlines are using the fuel price surge as a justification to increase fares, regardless of actual demand conditions. Courtney Miller, founder of Visual Approach Analytics, stated that airlines often set fare expectations based on fuel costs, but do not necessarily lower prices when fuel costs decline. This practice raises concerns about transparency and fairness in pricing strategies.

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While some airlines have hedged against fuel price increases, many U.S. carriers have not, leaving them vulnerable to market fluctuations. The potential for prolonged conflict in the Middle East raises questions about the sustainability of current fare levels. Analysts expect that even if hostilities cease, it may take airlines up to two months to adjust prices downward confidently.

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• “Since jet fuel has almost doubled [in price], I think we’ll be making an announcement about increasing fuel surcharges for both travel and cargo in due course,” — Ronald Lam, CEO of Cathay Pacific

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• “Airlines love to say fuel is expensive so you have to pay more. What they're doing is they're setting the expectation,” — Courtney Miller, Founder of Visual Approach Analytics

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• “It’s not that they want to make huge profits,” — Rico Merkert, Transport Professor at the University of Sydney

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The ongoing situation underscores the interconnectedness of geopolitical events and their direct impact on global travel and airline economics.

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