In response to the escalating conflict in the Middle East, major airlines including Australia’s Qantas Airways and New Zealand’s Air New Zealand have announced significant fare hikes. This move highlights the immense pressure global carriers face as jet fuel prices have skyrocketed, severely impacting their operating costs. Prior to the conflict, jet fuel was priced between $85 and $90 per barrel, but recent days have seen this figure nearly double, with prices soaring to a range of $150 to $200 per barrel. This unprecedented surge has forced airlines to reconsider their financial forecasts and operational strategies.
Air New Zealand, grappling with the uncertainty brought on by the ongoing conflict, has even suspended its financial outlook for 2026. The airline cited the volatile situation as a major factor in this decision, reflecting the broader instability affecting the aviation sector worldwide. The conflict, involving the U.S. and Israel against Iran, has sent shockwaves through the oil markets, causing crude prices to spike dramatically. This surge has not only inflated fuel costs but also disrupted global travel patterns, leading to sharply increased ticket prices on several key international routes.
Adding to the turmoil, airspace over the Middle East has become increasingly hazardous. On Tuesday morning, flights approaching Dubai were temporarily placed in holding patterns due to fears of a potential missile attack. Flight tracking services confirmed these delays, although the planes were eventually able to land safely. This incident underscores the growing risks airlines face when operating near conflict zones, prompting many to reroute flights and adjust schedules to avoid disruptions.
Qantas has responded by raising international fares and exploring options to shift capacity away from the Middle East, particularly towards Europe. The airline noted that demand for flights to Europe is exceptionally high, with bookings for March exceeding 90% capacity—well above the typical 75% occupancy for this period. This shift reflects a broader trend as both airlines and travelers seek to circumvent the unstable Middle Eastern airspace. Similarly, Hong Kong’s Cathay Pacific Airways is increasing its flight frequency to London and Zurich in March, aiming to accommodate passengers affected by airspace closures and capacity limitations on Asia-Europe routes.
Air New Zealand has implemented fare increases across its network, raising one-way economy ticket prices by NZ$10 on domestic flights, NZ$20 on short-haul international routes, and a substantial NZ$90 on long-haul journeys. The airline has warned that further adjustments to prices, routes, and schedules may be necessary if jet fuel costs remain elevated. Meanwhile, Hong Kong Airlines announced a steep rise in fuel surcharges, with increases up to 35.2% starting Thursday. The sharpest hikes will affect flights between Hong Kong and destinations such as the Maldives, Bangladesh, and Nepal, where fuel surcharges will jump from HK$284 ($49) to HK$384.
Political developments have also influenced the aviation sector’s outlook. U.S. President Donald Trump stated on Monday that the United States might escalate its military engagement with Iran if oil shipments from the Middle East are obstructed. This statement initially sent oil prices soaring to $119 per barrel but was followed by a decline to around $90 per barrel on Tuesday after hopes emerged that the conflict might de-escalate soon. The fluctuating oil prices have caused airline stocks in Asia to stabilize after steep losses, with Qantas shares rising modestly by 0.5%, Korean Air Lines surging nearly 9%, and Cathay Pacific climbing over 4%.
Fuel expenses represent the second-largest cost for airlines after labor, typically accounting for 20-25% of total operating costs. While some major Asian and European carriers have hedging strategies to mitigate oil price volatility, most U.S. airlines have largely abandoned such practices over the past two decades. The current fuel price spike is therefore hitting some carriers harder than others, intensifying the financial strain on the industry.
The ongoing conflict’s impact extends beyond fuel prices, severely disrupting global travel networks. Airlines are forced to reroute flights to avoid conflict zones, leading to congested airspace and capacity shortages on alternative routes. Notably, Middle Eastern carriers such as Emirates, Qatar Airways, and Etihad typically transport about one-third of passengers traveling between Europe and Asia, and over half of those flying from Europe to Australia, New Zealand, and nearby Pacific islands. The disruption of these routes has significant ripple effects across the global aviation market.
Travel agencies are also feeling the pressure. South Korea’s HanaTour Service has begun canceling group tours involving flights to the Middle East and is waiving cancellation fees for affected customers. All tours linked to the region scheduled for March have been suspended. In Thailand, the Ministry of Tourism has warned that if the conflict continues beyond eight weeks, the country could lose nearly 596,000 tourists, resulting in a staggering revenue loss of approximately 40.9 billion baht ($1.29 billion). These figures highlight the broader economic consequences of the conflict on tourism-dependent economies.
