Even if a lasting ceasefire between the US and Iran lowers oil prices, travelers hoping to snag cheaper airfare should buckle their seatbelts and expect continued turbulence.
US domestic airfares are ۲۶.۵% higher than a year ago, according to June’s consumer price index data, and analysts say prices globally are up ۲۵-۳۰% compared with ۲۰۲۵.
Strong demand for travel and reduced global oil refining capacity caused jet fuel prices to spike during the early weeks of the Iranian war. While prices are off their highs, they remain elevated. Jet fuel was trading about $۱۴۹ a barrel as of ۴ August, up from $۹۰ at the start of ۲۰۲۶ – a ۶۵% increase. Crude-oil prices are up about ۳۰% since January, trading around $۷۶ a barrel.
Jet fuel costs rise slightly higher than oil prices because on average, only about ۱۰% of refined oil can be turned into jet fuel. “The more limited the product, the more vulnerable it is to these supply shocks,” said Louise Burke, the global head of aviation at Argus Media, a commodities data provider.
There have been a “substantial” amount of refinery closures, Burke said, a key to why jet fuel prices have soared so much higher than standard crude oil. A new refinery in west Africa has helped bring on supply, and refiners are making tweaks to boost output to about ۱۲-۱۴% to take advantage of the higher jet fuel prices, which has helped to alleviate some of the shortages.
Jet fuel prices are the biggest operating cost for airlines and the hardest to control, said John Grant, the chief analyst at OAG, an aviation data firm. Cost can range between ۳۰% and ۳۵%.
Airlines have little wiggle room to control the impact of higher jet fuel prices. Some airlines may hedge their fuel costs to limit losses, but others buy on the volatile spot market. Each carrier has a strategy to control costs, such as how they use aircraft or cut routes.
But rising jet fuel prices are just part of the reason for expensive plane tickets. Capacity constraints at Boeing and Airbus have delayed some aircraft deliveries, while the US Federal Aviation Administration’s (FAA) continued staffing issues has led to fewer flights from some of the biggest airports.
The ongoing US-Iran conflict gives carriers cover to pass along more of the costs. “For the airlines, there’s no better time to do it. When there’s a war on, they’ve got a great excuse,” Grant said.
Demand for flying has also persisted despite higher airfares, giving airlines more leeway to continue charging higher prices.
Burke said demand for jet fuel may be peaking with the summer travel season wrapping up, and if there’s a lasting ceasefire, prices could start to normalize. But the impact on energy prices seen after Russia’s invasion of Ukraine in ۲۰۲۲ has shown that it could take a year or so for prices to normalize.
The current US-Iran conflict may play out differently since there is much more volatility, she added, noting that US jet fuel inventories are at the lower end of a five-year average.
Legacy carriers such as American Airlines, United Airlines and Delta Air Lines said in recent earnings calls that higher airfares helped to offset some of the higher fuel costs, but the volatility of prices makes it hard to forecast the effects, according to a Reuters report.
While some airlines are profitable, many aren’t. In the best cases, airlines have margins of about ۱۵%, Grant said. Globally, there are about ۵۰ airlines who are very profitable, but many are “surviving on cashflow and revenue generated”.
It’s why he doesn’t expect any significant reduction in airfares in the next year. “There isn’t sufficient capacity to come back into the system to create any sort of price war or discounting,” he said.
Katy Nastro, a spokesperson for the travel service website Going.com, concurred. With Spirit Airlines closing earlier this year, she is watching other low-cost airlines, which have largely not been profitable after the pandemic. The loss of Spirit means less competition for other airlines and potentially higher fares for flyers.
The shoulder season of September into October will be a test to see if travel demand continues. Nastro said travel deals come and go more quickly, a signal that airlines are testing consumer appetite in real time as they try to recoup some of their fuel costs. Airlines could trim some routes this fall in anticipation of people traveling less.
For those wanting to travel during the popular fall and winter holidays, Going is seeing Thanksgiving fares up ۱۹% compared with ۲۰۲۵, which she said, “is pretty stark”.
She also recommends not waiting to buy tickets. “Hoping at this point that the flight price that you’re looking at for Thanksgiving is going to drop by $۱۰۰ is, I think, wishful thinking,” she said.
