The current U.S.-Israel war on Iran is causing a stark increase in jet fuel prices, which might have a long-term impact on the aviation industry. While airlines are revising their financial plans for 2026, fare increases are imminent, and experts are already predicting potential mergers within the industry.
At the end of February, just before the first U.S.-Israeli strikes on Iran, jet fuel in the U.S. was priced at $2.50 a gallon. Over the course of a month, that number has risen significantly; on 30 March 2026, it cost no less than $4.62 per gallon. Such hefty price increases are not without consequence, especially when they persist, as fuel amounts to approximately a quarter of airline operating costs.
✈️ Drewry reports a 95% MoM surge in airfreight rates in March, mostly a result of a surge in fuel costs.
— MTS Insights (@MTSInsights) March 31, 2026
Drewry suggested that "rates could exceed the 2020 pandemic record of $9.40 if fuel surcharges continue to rise." pic.twitter.com/blk9uFr2w1
On Friday, 20 March 2026, United Airlines CEO Scott Kirby already announced that the airline would be cancelling 5% of its planned flights in the short term due to the spike. Moreover, he projected that jet fuel would go as high as $175 and would not go down to $100 per barrel before the end of 2027. At the current rate, United would be confronted with an extra $11 billion in annual expenses for fuel alone.
However, Kirby also mentioned that higher fuel prices would create an opportunity “to buy assets, absorb network changes”. In other words, rivals might fall, while the strongest airlines in the market might take the opportunity to expand.
@bloombergbusiness United Airlines CEO Scott Kirby says ticket prices may have to go up by 20% if jet fuel prices remain elevated for longer. #airlines #travel #oil #business #CEO ♬ original sound – Bloomberg Business
Budget airlines in particular are vulnerable when fuel prices surge, credit ratings agency Moody’s points out, as they rely on high passenger volumes and low fares, leaving them with less margin. Still, according to Moody’s, in the U.S., Delta Air Lines and United Airlines are best-positioned to deal with the price increase, while JetBlue, Frontier Group, and Spirit Airlines were identified by news agency Reuters as the most vulnerable.
Whether or not the jet fuel spike might cause a merger wave like the financial crisis of 2008 did, remains uncertain at the moment of writing. However, the longer the U.S.-Israeli war on Iran persists, the more likely it becomes that at least some airlines will struggle to continue.
Gas prices are spiking— diesel and air fare too.
— Senate Democrats (@SenateDems) March 10, 2026
Higher costs for Americans because of Trump’s war in Iran
And Trump says he’s not worried about that, he “knew oil prices would go up.” pic.twitter.com/VpiZ2AFxZB
Fare increases and cancellations
In the short term, travellers should mainly be expecting fare increases and cancellations. Delta Air Lines CEO Ed Bastian announced that the surge in fuel costs has meant an extra $400 million in costs in March 2026, which would be translated as soon as possible into fare increases.
American Airlines, Lufthansa, Air France-KLM, Qantas, Thai Airways, Cathay Pacific: faced with the reality of higher fuel costs, airlines are en masse trying to raise their fares in order to make passengers absorb as much of the added expense as possible. Moreover, due to a combination of tight fuel supplies and airspace chaos in the Middle East, many are cancelling or rerouting flights as well. For the region’s visitor economy alone, the cost of the war is estimated at some $600 million per day according to the World Travel & Tourism Council, but the global impact is likely to be much higher.
