Key facts
- Renewed Middle East conflict has caused Brent crude oil prices to exceed $100 per barrel.
- U.S. jet fuel exports have reached record highs, contributing to market tightening.
- Southwest Airlines chartered a vessel to transport jet fuel from Houston to Los Angeles, facilitated by a Jones Act waiver.
- Airlines are lowering earnings expectations due to significant increases in fuel expenses.
- Southwest Airlines' Q2 fuel expenses rose by $900 million year-over-year.
- American Airlines' Q2 fuel expenses increased by over $2.2 billion year-over-year.
U.S. airlines are facing escalating jet fuel costs due to renewed hostilities in the Middle East, which have pushed Brent crude oil prices above $100 per barrel. This situation has shattered a recent U.S.-Iran understanding and exacerbated existing supply constraints in the global fuel market.
The U.S. jet fuel market has been tightening since March, with record-high exports of jet fuel, gasoline, and diesel contributing to soaring refining margins. This has led to increased airfares and depressed airline earnings. Southwest Airlines, facing particularly tight supply on the West Coast, chartered a vessel to ship jet fuel from Houston to Los Angeles, a move made possible by a waiver of the Jones Act from the Trump Administration.
Following the collapse of the U.S.-Iran memorandum of understanding, fuel prices have rallied again, forcing U.S. carriers to lower their earnings expectations despite strong summer demand. Fuel costs represent a significant expense for airlines. Southwest Airlines reported a year-over-year increase of $900 million in Q2 fuel expenses, impacting its adjusted earnings per share. American Airlines saw its Q2 fuel expenses jump by over $2.2 billion, leading to a revised full-year earnings outlook. United Airlines anticipates nearly $6 billion in additional fuel expenses for the full year 2026 and secured new liquidity to hedge against geopolitical uncertainty.