Key facts
- Middle East conflict reshapes global oil trade, affecting inflation, monetary policy, and trade balances.
- Global airlines are projected to lose $100 billion due to an energy shock originating from Iran impacting jet fuel costs.
- High jet fuel prices may trigger airline bankruptcies and consolidation.
- Southwest Airlines anticipates its Boeing 737 MAX 7 will enter service in 2027.
- Air New Zealand expects high fuel costs through FY27, with jet fuel prices around $150 per barrel.
- Pakistan seeks 1 million tons of LNG to meet rising summer electricity demand.
- Jet fuel supply shortages have led to significant disruption at two major UK airports.
- Record high crack spreads have impacted refiner profits and airline operations.
The Middle East conflict is significantly impacting global oil trade, affecting inflation, monetary policy, and trade balances. This energy shock, originating from Iran, is projected to cost global airlines $100 billion due to surging jet fuel costs. While some net oil exporters may benefit, countries with limited refining capacity or high reliance on refined product imports face challenges. Record high crack spreads are impacting refiner profits and airline operations.
Escalating jet fuel prices are expected to trigger airline failures and consolidation, according to IATA Director General Willie Walsh. Budget carriers are particularly vulnerable, with Spirit Airlines' recent collapse serving as a stark example. Air New Zealand is preparing for sustained high fuel costs extending into its 2027 financial year, projecting jet fuel prices around $150 per barrel. The airline has hedged only 25% to 40% of these increased expenses.
In parallel, Pakistan has issued a tender for 1 million tons of LNG to meet rising summer electricity demand. This is the fourth such tender in two months, as the country struggles with high prices and securing contracts, relying partly on Qatar's term supply. Jet fuel supply shortages have also led to significant disruption at two major UK airports, though the specific locations and extent of the disruption were not immediately clear.
Southwest Airlines is anticipating its Boeing 737 MAX 7 will enter service in 2027, contingent on FAA certification. The airline is exploring a broader transformation that includes airport lounges, trans-oceanic flights, and premium seating, and is considering Amazon's Leo satellite network for Wi-Fi.