Since the U.S.-Iran conflict began on February 28 and the Strait of Hormuz closure sent oil markets into a frenzy in March, the aviation industry has been absorbing a fuel shock that IATA Director General Willie Walsh calls potentially "existential" for weaker carriers.

The Numbers

IATA laid out the full damage at its 82nd Annual General Meeting in Rio de Janeiro on Sunday, June 7. According to IATA's financial outlook, global airlines are expected to spend $350 billion on fuel in 2026 — up from $252 billion in 2025. That's a $98 billion jump, and it's not because planes are burning more fuel. Total consumption is roughly flat at 104 billion gallons.

Every dollar of that increase is pure price shock.

Jet fuel is forecast to average $152 per barrel this year, up from $90 per barrel in 2025 — a 69% spike. Crude oil is expected to average $95 per barrel versus $69 last year. The crack spread — the premium jet fuel commands over crude — has hit a historic high of $57 per barrel, per IATA data.

The week ending June 5, jet fuel prices were still running 62.4% higher year-over-year, according to IATA. This is not a one-month blip, but a sustained price regime.

Industry Impact

Global airline net profits are projected at $23 billion in 2026, down from $45 billion last year and well below IATA's earlier 2026 forecast of $41 billion, according to Travel Tomorrow. Net margins fall from 4.2% to 2.0%. Net profit per passenger drops from $9.10 to just $4.50.

Walsh put that number in blunt terms at the summit: "It won't even buy you a hot dog at most of the FIFA World Cup venues."

Total industry revenues are expected to climb 9.4% to $1.165 trillion as airlines hike fares. But operating expenses are surging 13% to $1.117 trillion. That leaves an operating profit of just $48 billion, down from $76.4 billion in 2025, per UzDaily citing IATA data.

Fuel's share of total operating costs is jumping from 25.4% to 31.4%. One dollar in three spent running an airline now goes straight to the fuel pump.

Regional Exposure

Middle Eastern carriers are in the deepest trouble. Emirates, Qatar Airways, Etihad, and their regional peers are forecast to post a combined net loss of $4.3 billion in 2026, according to IATA — sitting at the geographic epicenter of the conflict.

U.S. carriers spent 56.4% more on jet fuel in March than in February, according to Department of Transportation data cited by CNBC. Airlines that never fully rebuilt their balance sheets after COVID are most exposed.

Walsh was direct: "For a lot of airlines the increase in the fuel bill is potentially existential."

Fare Increases Ahead

British Airways CEO Sean Doyle told the Guardian on the sidelines of the Rio summit: "There's no getting away from it — if fuel goes up, fares have to go up."

Doyle added that long-haul and business travelers will absorb the largest fare increases first. BA's premium-heavy route network means it will pass through more costs than a budget leisure carrier. Short-haul holiday flights will be the last to move — but they will move.

Walsh said: "High oil prices will inevitably mean higher ticket prices."

An IATA survey found 86% of travelers already expect fares to track oil prices. About 49% expect to spend more on travel in 2026 than in 2025. Passengers know what's coming.

The Geopolitical Variable

Most outlets are framing this as a weather event — something that happened to airlines. The reality is more direct.

The Strait of Hormuz closure in March was a direct consequence of the U.S.-Iran conflict that started February 28. That policy decision — and whatever follows it diplomatically or militarily — is the single biggest variable for whether the airline industry stabilizes or deteriorates further. Fuel prices are up 62.4% year-over-year as of early June. If the conflict drags on or escalates, Walsh's $23 billion profit forecast could look optimistic.

Also largely absent from coverage: the crack spread sitting at a historic $57 per barrel premium over crude. Even if crude oil prices moderate, jet fuel prices won't necessarily follow. Refining capacity and distribution constraints are their own problem.

Ryanair's situation is a microcosm. According to CNBC, Ryanair is shutting its Thessaloniki base in October 2026 following a dispute over airport charges imposed by operator Fraport Greece. Budget carriers are getting squeezed from both ends — fuel costs on one side, airport fees on the other.

Implications for Travelers and Investors

Flyers should budget for higher fares this summer and fall. Business class and long-haul routes get hit first and hardest. Budget short-haul carriers will hold prices longer but they won't hold forever.

For investors in airline stocks or funds holding them, a 2.0% net margin industry carries significant risk. One bad quarter or another geopolitical flare-up could push several carriers into the red.

The war started in February. The fuel shock hit in March. It's June now, and the industry is still burning.