Jet Fuel Prices Double to $181/Barrel Amid Strait of Hormuz Closure; Airlines Cut 13,000 Flights

Concerns are escalating over jet fuel prices and availability due to the US-Iran deadlock, which has closed the Strait of Hormuz. The International Air Transport Association (IATA) reported that kerosene averaged $181 (€154) a barrel last week, more than double the price a year ago. This has led airlines worldwide to cut 13,000 flights, according to Cirium, with fears of supply shortages during peak summer travel.

Lufthansa has cut 20,000 flights, including from Cork to Frankfurt. While Irish carriers Aer Lingus, Ryanair, and Emerald Airlines have also adjusted summer services, they cite maintenance and Dublin Airport passenger caps, not fuel costs. Analysts like Bernstein's Alex Irvine note that Ryanair and International Airlines Group (IAG), owner of Aer Lingus, are well-positioned due to hedging strategies. Ryanair's CEO, Michael O’Leary, stated the airline is best insulated, having prepaid for 80% of its fuel needs until March 2027, costing an extra $50 million so far, potentially rising to $600 million if the conflict continues.

Ireland, which imports all its jet fuel, relies on the National Oil Reserves Agency, holding a 70-day supply. Europe imports up to 40% of its jet fuel, with half typically via Hormuz, resulting in a 15-20% reduction in normal supplies. The UK has asked refiners to increase production, and the US is a key non-European source. Saudi Arabia and the UAE have alternative pipelines to bypass the strait.

Many observers anticipate a US-Iran settlement to reopen Hormuz soon, which would prioritize jet fuel shipments due to high prices, potentially averting a supply crunch before month-end.