According to a McKinsey report, airfares could increase by up to 25% as jet fuel costs surge due to geopolitical disruptions and refinery constraints tightening global supplies. The consultancy warns that jet fuel prices are expected to remain elevated for several months even if shipping activity through the Strait of Hormuz returns to normal levels, as countries may seek to replenish inventories and expand strategic reserves. As reported by ANI, geopolitical tensions in different parts of the world and limited refinery output are affecting the supply of aviation fuel, with airlines having no option but to pass on the additional cost to passengers. The report notes that jet fuel prices have surged mainly due to crude oil trends, while supply has been constrained because of reduced refinery production from major Gulf-region and Asian jet fuel exporters. The situation is further complicated by limited availability from Asia, with countries such as China, India, and South Korea having partially restricted exports following recent geopolitical tensions, reducing the potential for alternative supply sources.
As reported by The Times of India, supply pressures are reflected in the jet fuel "crack spread," the difference between crude oil and refined fuel prices. Historically, jet fuel crack spreads have generally remained around $20 per barrel or lower, but the consultancy expects the average crack spread in 2026 to exceed $50 per barrel. Countries including China, India and South Korea have moved to at least partially restrict fuel exports following recent geopolitical tensions, limiting Asian markets' ability to fill supply gaps. The report states that meeting the jet fuel shortage may not be easy for Asian countries in the short term, with many global refineries already operating at full capacity, leaving little room to increase production quickly. According to the report, "existing inventories have been doing heavy lifting to bridge the supply gap," and while higher refining margins for jet fuel have prompted refiners to increase output, prices may remain elevated for months amid ongoing restocking and strategic storage rebuilding. Other exporting regions may contribute additional volumes, but not enough to fully offset the shortfall.
According to the McKinsey report, while fuel prices have risen largely in line with crude oil trends, supply has been constrained by reduced refinery production from major jet fuel exporters in the Gulf region and Asia, which together account for about 40% of global jet fuel supply. The report notes that many global refineries were already operating at high utilisation rates before the conflict began, leaving little spare capacity to significantly boost output. Currently, countries in the Gulf region and major Asian exporters together supply around 40 percent of the world's jet fuel, with production at many refineries in these regions having declined, creating concerns over future supplies. While a "potential increase in tanker traffic through the Strait of Hormuz" could reduce immediate fuel price pressure, "jet fuel prices and crack spreads could remain volatile while inventories are rebuilt and supply chains normalise," McKinsey noted. Higher refining margins are encouraging refiners to increase output, which may gradually ease supply pressure over time.
The consultancy highlights the significant impact on airline operations, noting that fuel typically accounts for around 30% of an airline's operating costs. As reported by ANI, fuel accounts for nearly 30 percent of the total cost of an airline ticket, and if jet fuel prices continue to rise sharply, airlines are likely to transfer the additional burden to passengers. The report adds that "given that about 30 percent of the price of an airline ticket typically goes toward fuel costs, a doubling of fuel costs (with most passed through) could lead to fare increases of roughly 20 to 25 percent." If tanker movement through the Strait of Hormuz increases and supply routes improve, some pressure on fuel prices could ease, but jet fuel prices are expected to remain volatile until inventories are rebuilt and global supply chains return to normal. The report notes that "jet fuel demand is expected to rise ahead of the peak summer travel season, even as global inventories remain depleted," adding another layer of complexity to the supply-demand imbalance.
