The Strait Is Open. The Crisis Isn't Over. Why Airlines and Energy Markets Are Still Reeling.

On February 28, 2026, the United States and Israel launched coordinated airstrikes against Iran, killing Supreme Leader Ali Khamenei. Iran retaliated by effectively closing the Strait of Hormuz — the narrow waterway through which roughly 20% of the world's oil and natural gas normally transits — bottling up one-fifth of global energy supply overnight [1]. Seven weeks later, a handful of tankers have begun trickling through the strait. But the damage to energy markets and the global airline industry has barely begun to heal.

WTI crude oil, which traded below $56 per barrel in late December 2025, surged past $114 per barrel in early April before settling near $101 as of mid-April 2026 — a 62.5% increase year-over-year [2]. Brent crude futures touched $120 per barrel at their peak in March before retreating to around $92 [3]. And jet fuel, the lifeblood of commercial aviation, has seen an even steeper climb: U.S. Gulf Coast kerosene-type jet fuel hit $4.14 per gallon in April, up from $1.88 in December 2025 — a 120% increase in four months [4].

Source: FRED / EIA

Data as of Apr 13, 2026CSV

The International Energy Agency has called this "the largest supply disruption in the history of the global oil market" [3]. And despite the partial reopening of the strait, the consequences are rippling through every corner of the aviation and energy sectors.

The Hormuz Bottleneck: Partial Relief, Persistent Gridlock

The Strait of Hormuz crisis removed approximately 10 million barrels per day of oil production from global markets as Gulf states were forced to cut output with storage tanks at capacity and no viable export route [3]. Iran's Islamic Revolutionary Guard Corps launched at least 21 confirmed attacks on merchant vessels and reportedly laid sea mines in the strait, collapsing traffic by more than 90% [1].

As of mid-April, only a few tankers had been observed transiting the waterway, under military escort [5]. An estimated 2,000 ships remained stranded in the region, with roughly 400 vessels staged in the Gulf of Oman waiting for conditions to improve [6].

The ships that cannot wait are rerouting around the Cape of Good Hope — a detour that adds 10 to 14 days to Asia-Europe voyages and 7 to 10 days to Persian Gulf–Western market routes [7]. Each rerouted Aframax tanker incurs approximately $933,000 in additional costs per voyage, while Panamax vessels face $1.2 to $1.8 million in extra fuel expenses per round trip [7]. Hull and cargo insurance premiums have surged 300% [6].

Nils Haupt, a spokesperson for shipping giant Hapag-Lloyd, summed up the logistics reality: "When the war is officially over, that does not mean the war is over for logistics, because then the real work starts" [6]. Svein Ringbakken of the Norwegian Shipowners' Association estimated it would take "months to get shipping supply chains back to normal because of the backlog" [6].

Why Prices Aren't Falling With the Strait "Open"

The persistence of elevated energy prices despite the partial reopening stems from several structural factors that go well beyond the physical flow of crude oil.

Refinery shutdowns. The crisis has not only blocked crude exports; it has also knocked out refining capacity across the Persian Gulf. Multiple refineries and gas processing facilities have shut down due to direct attacks or safety concerns [3]. The IEA estimates more than 4 million barrels per day of refining capacity is at risk, and Middle Eastern and feedstock-constrained Asian refineries have already cut runs by around 6 million barrels per day, to 77.2 mb/d [3]. Global crude runs are expected to decline by 1 mb/d on average in 2026, to 82.9 mb/d [3].

The crack spread explosion. While crude oil prices have risen roughly 30-35% from pre-crisis levels, jet fuel prices have more than doubled. The gap between crude and refined jet fuel — known as the crack spread — has surged from a pre-crisis range of $20–22 per barrel to as high as $144 per barrel in Asian markets before settling around $65 [8]. This means that even airlines with crude oil hedges in place are exposed to the ballooning cost of turning that crude into usable fuel.

Force majeure declarations. QatarEnergy, Kuwait Petroleum, and Bapco Energies have all declared force majeure — a legal designation that relieves them of contractual delivery obligations [6]. More than 40 energy assets across the region have been severely or very severely damaged [6].

Speculative positioning and insurance risk. The 300% increase in marine insurance premiums has created a self-reinforcing cycle: higher insurance costs raise the price of transported fuel, which feeds back into spot markets [6]. Marco Forgione of a UK trade institute estimated it could take "years" to rebuild shipper confidence in the strait, suggesting some traffic may permanently divert to alternative routes [6].

Source: EIA / FRED

Data as of Apr 14, 2026CSV

The Airline Industry: From Turbulence to Crisis

Fuel typically accounts for 25–40% of an airline's operating expenses. For many carriers, that share has now jumped to 40–45% [9]. The consequences are showing up in every part of the industry.

Fare increases across the board. Global airfares in early 2026 are approximately 24% higher than comparable periods in previous years, with year-over-year increases of 14.9% as of April [10]. Long-haul routes are absorbing the steepest increases. Major Japanese carriers have introduced fuel surcharges of approximately $164 per passenger per flight segment on long-haul services, while Cathay Pacific's long-haul surcharges have climbed to around $200 per segment [9]. In India and Vietnam, fare hikes of up to 70% have been reported [9].

Capacity cuts. A major U.S. carrier announced plans to cut roughly 5% of scheduled capacity in the second and third quarters, targeting red-eye services, midweek frequencies, and lower-demand weekend flights [9]. South Korean airlines have suspended international routes to Los Angeles, Dubai, and New York [11]. Qantas is contending with an estimated $800 million increase in its annual fuel bill and has temporarily suspended domestic routes [12]. Scandinavian Airlines has cancelled flights to conserve fuel, while British Airways is merging high-frequency short-haul routes [13].

Delta's $2 billion quarter. Delta Air Lines disclosed an additional $2 billion in fuel costs for the current quarter alone. The carrier is in a somewhat unusual position: it owns its own refinery, the Trainer facility in Pennsylvania, which provides a partial hedge against crack spread volatility — though not against crude price increases themselves [14].

Spirit Airlines: The Canary in the Coal Mine

The most dramatic casualty of the fuel crisis may be Spirit Airlines, which is reportedly facing liquidation as early as this week [15]. Already navigating its second Chapter 11 bankruptcy filing since 2024 — having reached an agreement in February 2026 to slash debt from $7.4 billion to $2.1 billion — the ultra-low-cost carrier's turnaround plan was built on fuel cost projections of roughly $2.24 per gallon [15]. With jet fuel now nearly double that figure, the carrier faces a projected $360 million cost increase that its thin margins cannot absorb [16].

The competitive implications extend beyond Spirit itself. Frontier Airlines and JetBlue Airways have roughly 32% and 21% of their capacity, respectively, competing head-to-head with Spirit on overlapping routes [15]. When Spirit exited the Minneapolis–St. Paul market in December, Delta fares on the same routes jumped by 50% or more within days — a preview of what concentrated markets look like without ultra-low-cost competition [15].

For leisure travelers and price-sensitive passengers, Spirit's potential liquidation removes one of the few remaining carriers whose entire business model was built around the lowest possible fares.

The Hedging Gap: Was This Crisis Self-Inflicted?

A central question hanging over the industry is whether carriers made themselves uniquely vulnerable to this shock by abandoning fuel hedging during the post-COVID recovery.

The numbers are stark. Three of the four largest U.S. carriers maintained zero financial fuel hedging positions as of 2025 [8]. Southwest Airlines — historically the industry's most famous hedger, having saved an estimated $3.5 billion through hedging between 1998 and 2008 — discontinued its program entirely on December 31, 2024 [8].

The logic at the time was defensible: hedging is expensive, and in periods of stable or declining fuel prices, it functions as a drag on margins. After the 2008 oil crash, carriers that had locked in high prices through hedging contracts suffered losses, creating institutional memory against the practice. During the post-COVID recovery boom, with demand surging and balance sheets recovering, many carriers chose to direct capital elsewhere.

European low-cost carriers tell a different story. Ryanair and easyJet entered the crisis with robust hedging positions, giving them greater short-term protection and the ability to maintain pricing discipline while competitors scramble [8]. The gap between hedged and unhedged carriers is now a gap between financial resilience and financial distress.

That said, hedging against crude oil would not have fully solved the problem. Because hedging contracts typically track crude benchmarks like Brent, not jet fuel prices directly, the explosion in crack spreads means even hedged carriers face significant exposure to the refining margin premium [8]. The jet fuel crack spread surging from $20–22 to $65–138 per barrel represents a cost increase that no standard hedging contract would have covered.

Historical Comparison: 2008 and 2022

The 2008 oil spike saw crude prices reach $147 per barrel before collapsing. That crisis triggered a wave of airline bankruptcies and consolidation but was ultimately short-lived — prices fell as rapidly as they had risen once the financial crisis cratered demand.

The 2022 post-Ukraine energy shock pushed Brent crude above $120 per barrel and jet fuel prices to around $4.50 per gallon at their peak, but the disruption was concentrated in European natural gas markets and proved manageable for most carriers because the duration was relatively brief and hedging positions were still more common.

The 2026 crisis is distinct in several ways. First, the supply disruption is larger in absolute terms — 10 million barrels per day removed from the market versus roughly 1–3 mb/d in previous crises [3]. Second, the disruption is hitting both crude supply and refining capacity simultaneously, creating the crack spread problem described above [14]. Third, the airline industry entered this crisis with historically low hedging coverage, amplifying its exposure [8]. And fourth, the timeline for normalization is measured in months or years, not weeks — the physical infrastructure damage and shipper confidence deficit will outlast any ceasefire [6].

Whether this makes the current episode "worse" depends on the metric. Crude price levels remain below the 2008 peak. But the percentage of operating cost absorbed by fuel, the breadth of the supply disruption, and the structural vulnerability of the airline industry arguably make this the most consequential energy shock for aviation since deregulation.

Government Responses: SPR Releases, EU Emergency Planning, and the Clock

Governments have responded with the largest coordinated emergency oil release in history. Thirty-two countries sold a combined 412 million barrels from their strategic reserves beginning in late March 2026, with the United States contributing 172 million barrels [17]. Unlike previous SPR releases, the 2026 action was structured as an exchange: oil companies receive barrels now but must repay approximately 200 million barrels at a future date, allowing the SPR to be replenished without direct taxpayer cost [17]. The U.S. SPR currently holds slightly more than 415 million barrels, about 40% below total capacity [17].

In Europe, the situation is more acute. IEA head Fatih Birol warned that Europe has "maybe six weeks or so" of jet fuel remaining [14]. Airports Council International Europe has cautioned of a "systemic jet fuel shortage" if strait passage does not normalize by the end of April [14]. The trade association Airlines for Europe has requested EU-level monitoring of jet fuel supplies, temporary suspension of the EU carbon market for aviation, relief from aviation taxes, joint kerosene purchasing arrangements, and legal clarity that conflict-driven airspace closures count as justified slot non-compliance [13].

The European Commission plans to propose an energy response package on April 22, 2026 [13]. Austria has moved independently, activating its national stock-holding agency to release 120,000 tonnes of Jet A-1 fuel from strategic reserves [13]. Broader emergency measures under consideration across the EU include capping electricity tariffs, deferring refinery maintenance, and possible route subsidies — though the latter remains politically contentious [13].

China has banned jet fuel exports due to insufficient crude supply, and South Korea has cut production for the same reason — removing two of the world's top three jet fuel exporters from the global market alongside Kuwait, which cannot move finished product out of the Gulf [14].

The Distributional Question

The burden of the fuel crisis falls unevenly across traveler segments. Short-haul domestic fares have risen modestly — under 1% on some routes — because fuel represents a smaller share of per-passenger cost on short flights [10]. Long-haul international fares are projected to increase by more than 2%, with some routes seeing far steeper increases when fuel surcharges are included [10].

But the passengers most affected are not necessarily those flying the longest distances. They are the ones who depended on ultra-low-cost carriers for affordable travel. Spirit Airlines served 77 destinations across the Americas, offering fares that legacy carriers rarely matched [15]. Its potential exit from the market removes price discipline from dozens of routes. Leisure travelers who relied on budget fares for family visits and vacations — disproportionately lower-income households — face either paying substantially more or not flying at all.

Business travelers, by contrast, have greater ability to absorb fare increases or shift to videoconferencing. The distributional impact mirrors a pattern seen in every energy shock: the costs are regressive, falling hardest on those with the least flexibility.

What Comes Next

The partial reopening of the Strait of Hormuz is a necessary but insufficient condition for market normalization. The physical backlog of 2,000 stranded ships will take months to clear [6]. Damaged refineries and processing facilities will take longer to repair — the IEA counts more than 40 severely damaged energy assets in the region [6]. Insurance markets will not return to pre-crisis pricing until sustained safe passage is demonstrated over an extended period.

For airlines, the near-term outlook depends on whether crude prices stabilize near current levels or continue to decline as SPR releases and rerouted supply reach markets. If jet fuel remains above $4 per gallon through the Northern Hemisphere summer travel season, additional route cuts, carrier bankruptcies, and fare increases are likely. Europe's six-week jet fuel supply window represents the most immediate cliff edge [14].

The longer-term question is whether this crisis produces structural change in the airline industry's approach to fuel risk. The post-2008 retreat from hedging left carriers exposed to exactly the kind of supply shock that hedging is designed to mitigate. Whether the industry rebuilds those positions — and whether regulators impose any requirements — will determine how vulnerable aviation remains to the next disruption.