Oil prices surged above $100 a barrel for the first time since 2022 as markets opened today (March 9), driven by the escalating conflict in the Middle East and diminishing confidence of a quick resolution.
The surge also follows yesterday’s news that Iran has named Motjaba Khamenei as its new supreme leader and successor to his father, who was killed on the first day when the US and Israel initiated attacks. Iran quickly began enacting retaliatory strikes on Israel and US-allied countries in the Gulf region, further widening disruption – particularly for the air travel sector.
The attack on Iran began on February 28, spurred by Iran allegedly rebuilding its nuclear programme.
President Donald Trump took to his own social media platform Truth Social to state: “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!”
The issue has had immediate impact on the aviation sector with airspace closures across the Gulf region, with thousands of flights cancelled. Emirates and Etihad have only recently begun operating limited flights, with both prioritising passengers with earlier bookings.
Over the weekend, Qatar Airways was given approval from the Qatar Civil Aviation Authority for a “limited operating corridor” for flights to Doha from select airports. The flights were only for passengers whose final destination is Doha. The airline’s scheduled flight operations remain suspended due to the Qatari airspace closure.
However, the oil price spikes are set to have an impact on a global scale for the airline sector.
“It’s already going to have a meaningful impact – not only on Q2 but also on Q1 as well,” said Alton Aviation Consultancy managing director Bryan Terry, speaking to Airline Economics. “We’re starting to see industry CEOs have already discussed the impact on Q1 given the spike in fuel prices associated with the conflict for the month of March and also the impact on operating costs and passenger demand.”
On Friday last week (March 6), Lufthansa had highlighted its hedging strategy, which may help offset the impact of flight cancellations for Middle East-bound flights.
The airline group estimated the conflict would cost around €5 million per week in cancellations. The Middle East made up around 2% of its capacity in 2025, though it is normally around 3%, but was reduced amid conflict in the region last year.
“There are pros and cons [to the situation] and it’s very difficult right now to quantify them only after a few days,” said Lufthansa CEO Carsten Spohr. “Cost of cancellations exist at around €5 million per week, which is our best estimate. But at the same time, we have a relative advantage on the fuel cost.”
The airline noted in the call that it had a hedge ratio of over 80%, which management said was higher than its main competitors.
“The only other airline hedged like we are is Ryanair with which we hardly overlap and should give us a relative advantage when prices in the market need to go up to cover for higher fuel prices – especially of course for our American competitors who more or less are not hedged at all,” said Spohr.
United Airlines CEO Scott Kirby told CNBC on the same day as Lufthansa’s earnings call that jet fuel prices could impact US carriers’ bottom line sooner than anticipated, with airlines in the country largely not hedging fuel due to difficulties surrounding crack spread pricing. Crack spread pricing is the margin between crude oil and refined jet fuel.
“It’s easier for network carriers to raise fares – easier to raise them if you have premium offerings,” said Terry. “That goes against the low-cost carriers.”
While Ryanair’s hedging strategy might support it in keeping its fares competitive, other low-cost carriers may be presented with challenges in balancing fares with competitiveness and profitability.
“With fuel price spikes, it impacts carriers pretty evenly worldwide,” said Terry. “You will see some slight differences in West Texas crude versus Brent crude, but on the margins, they’re all up significantly.”
While fares have increased in a limited capacity so far, Terry said it is anticipated that the surge in fuel will have a wider impact of airfares.
“We’ll see that in different forms,” he said. “As an example, a lot of the Asian carriers and some of the European carriers utilise fuel surcharges. That practice is not as much in North America where pricing cost increases are baked into fare increases. But we’re already seeing signs of that on a global basis.
“Some of the impact will also depend on their route networks and their network plans. Some of the European carriers have more exposure to the Gulf region than some of their North American counterparts or those in the Asia Pacific area. From a demand perspective, there could be more impact on the European community.”
Lufthansa said in its earnings call that there will be “flexibility” in its network as it puts capacity into China, South Africa, and Southeast Asia, and will reallocate capacity “throughout the whole summer if needed”.
The company said it saw a “sharp rise in demand” for long-haul flights since the conflict broke out – particularly on routes to and from Asia and Africa. The airline group said this could be offset by other European carriers potentially “overcompensating” for the shift in travel demand.
Terry said it is difficult to predict how travel and tourism demand shifting from the Middle East may be dispersed globally.
“Business travel will be depressed for a period of time until the environment is healthy enough for people to restart their business travel to the region,” he said.
As the conflict reaches its second week today, visibility on a resolution is shrouded.
“The big question is the duration,” said Terry. “How long this will last at its current levels… it’s certainly unsustainable.”
He added: “If this was sustained beyond 60 days, it could easily wipe out the profit margin for the entire year.”
In December 2025, the International Air Transport Association (IATA) projected airlines’ total net profits to reach $41bn, and a net profit margin of only 3.9%. At the time, fuel costs were predicted to account for 25.7% of total operating expenses, down from 26.8% in 2025.
The surge in fuel prices may also have an impact on network plans, schedules, and even fleet strategy. Amid higher fuel costs, airlines may attempt to further accelerate fleet renewal – opting for more fuel-efficient aircraft and potentially retiring older aircraft due to a shrinkage in demand.
Of course, airlines have already been pushing for fleet renewal, but the consistent, well-documented aircraft supply constraints have hampered timely renewal plans.
“There’s already a very tight supply of new aircraft, and the delivery timelines are very long for those, but we could see even more pressure on the fleet renewal side,” said Terry.
This could lead airlines to evaluate leasing options if the fuel situation worsens or continues for an extended period.
“The valuations of aircraft are probably changing dynamically,” said Terry. “The question is if those valuations are being impacted by the rise in fuel prices, to what degree will they return as fuel prices retreat? Those are always interesting markets and difficult to predict. The only thing you can predict is that the valuations will probably change more fluidly right now.”
The UK Chancellor Rachel Reeves said today that the war in the Middle East is likely to put upward pressure on inflation following a meeting with G7 finance ministers.
Reports suggest the group is considering releasing 300 million barrels from emergency oil stockpile, which would be more than double the previous intervention made in April 2022 following Russia’s invasion of Ukraine, which was already a record level.
The reported 300 million barrels would represent a quarter of the reserves. However, France’s finance minister Roland Lescure told media that the move remains under discussion and the ministers are “not there yet” on releasing emergency oil.