Airlines raise fares as Middle East war drives fuel spike

Airlines are warning passengers to brace for higher ticket prices as a sharp jump in jet fuel costs, driven by escalating conflict in the Middle East, squeezes margins and disrupts global flight operations.

Australia’s Qantas Airways and Air New Zealand have begun lifting fares, underscoring the speed of the fuel surge and the difficulty of absorbing it. Air New Zealand said jet fuel, which had been around US$85–$90 per barrel before the crisis, has recently traded between $150 and $200. Citing uncertainty, the carrier also suspended its 2026 financial outlook.

Heightened hostilities involving Iran, Israel, and the United States have pushed oil prices higher, complicating airline routing and raising the risk of softer travel demand or even localized groundings if conditions worsen. Airspace disruptions across parts of the Middle East have added to operational challenges; flights approaching Dubai were briefly held in stacks due to a potential threat before landing safely.

Fares and surcharges climb

Qantas said it is increasing international fares and is exploring redeploying capacity toward Europe as carriers and travelers reroute to avoid affected airspace. Demand has spiked: Qantas reported its Europe services are already more than 90 percent full for March, compared with a typical load factor of about 75 percent at this time of year. Capacity constraints and detours have especially driven up prices on Asia–Europe routes.

Air New Zealand raised one-way economy fares by NZ$10 on domestic routes, NZ$20 on short-haul international flights, and NZ$90 on long-haul services. The airline warned that further adjustments to pricing, networks, and schedules are possible if fuel remains elevated.

Hong Kong Airlines will increase fuel surcharges by up to 35.2 percent, with the steepest rises on services between Hong Kong and the Maldives, Bangladesh, and Nepal, where the surcharge will climb to HK$384 from HK$284. Cathay Pacific said it reviews fuel surcharges monthly and had kept select long-haul surcharges unchanged prior to the conflict.

In Southeast Asia, Vietnam Airlines has asked authorities to remove an environmental tax on jet fuel to help sustain operations. The Vietnamese government said carriers’ operating costs have risen by 60 percent to 70 percent amid higher fuel prices, and suppliers are struggling to meet demand.

Rerouting and capacity pressures

Extended detours to avoid Middle Eastern airspace are adding flight time, burning more fuel, and tying up aircraft and crews. That ripple effect reduces available seats on already busy corridors. Gulf super-connectors—Emirates, Qatar Airways, and Etihad—normally carry about one-third of passengers traveling between Europe and Asia and more than half of those flying between Europe and Australia, New Zealand, and nearby Pacific islands. Any disruption to these routings can quickly tighten capacity and lift fares globally.

To help meet demand, Cathay Pacific plans additional flights to London and Zurich, while Qantas is evaluating alternative routings to keep Europe services flowing. The combination of lengthened flight times and higher fuel burn is magnifying cost pressures precisely as demand remains resilient.

Markets, costs, and hedging

Oil prices, which spiked to around $119 per barrel at the height of the recent turmoil, have since eased back toward $90, helping steady airline shares after sharp declines. In Asian trading, Qantas rose 0.5 percent, Korean Air nearly 9 percent, and Cathay Pacific more than 4 percent as sentiment improved.

Fuel is typically the second-largest expense for airlines after labor, often representing roughly 20 to 25 percent of operating costs. Some Asian and European carriers hedge a portion of their fuel needs to smooth price swings, while many U.S. airlines largely stepped away from hedging over the past two decades, leaving them more exposed to spot-market volatility. When prices jump suddenly, airlines must either absorb the hit—compressing margins—or pass it on through higher fares and surcharges.

Tourism impact extends beyond airlines

Higher fares and flight disruptions are already reverberating across the wider travel industry. South Korea’s HanaTour Service canceled group tours that involve flights to the Middle East and is waiving cancellation fees, suspending all tours to the region through March.

Thailand’s Ministry of Tourism warned that a conflict extending beyond eight weeks could result in the loss of nearly 596,000 tourists and about 40.9 billion baht in revenue, highlighting the vulnerability of regional tourism to geopolitical shocks and elevated travel costs.

What travelers can expect

• Higher ticket prices: Expect incremental fare and surcharge increases, especially on long-haul and rerouted services.
• Reduced availability: Full flights and constrained capacity on Europe–Asia and Europe–Oceania routes may persist while detours remain.
• Schedule adjustments: Carriers may tweak timetables, routings, and frequencies at short notice to navigate airspace restrictions.
• Potential volatility: Fuel and fare levels could shift quickly with any change in the security situation or oil markets.

For now, airlines are balancing strong travel demand with a challenging cost environment. If fuel remains elevated and airspace restrictions persist, further price adjustments and schedule changes are likely, even as carriers add selective capacity to the busiest corridors to relieve pressure where they can.