Jet fuel crunch may outlast Hormuz truce

Airlines and energy traders are bracing for a prolonged squeeze in aviation fuel supplies even after the Strait of Hormuz reopened under a two-week ceasefire arrangement announced by US President Donald Trump, with the head of the International Air Transport Association warning that disruption to jet fuel availability could take months to unwind. Oil prices dropped sharply below $100 a barrel after the truce was disclosed, but the fall in crude has not removed concern that refined fuel markets, especially for aviation, will remain tight as Middle Eastern refining and export flows recover unevenly.

Willie Walsh, IATA’s director general, said the main problem for carriers is no longer only the price of crude but the interruption to the production and movement of jet fuel through a region that plays a central role in global energy trade. His warning points to a widening gap between headline moves in oil benchmarks and the physical realities facing airlines, airports and fuel suppliers. Even where crude shipments resume, the refining system that turns oil into aviation fuel, diesel and other products may take longer to normalise, keeping margins elevated and supply patchy across several markets.

Brent crude fell to about $94.76 a barrel while US West Texas Intermediate dropped to about $95.79 after Trump said he had agreed to suspend bombing operations against Iran for two weeks, conditional on the immediate and safe reopening of Hormuz. The move marked a dramatic reversal from the previous trading session, when oil had surged on fears that a prolonged closure of the strait could choke off a major share of the world’s seaborne oil flows. Markets treated the reopening as a sign that the worst-case supply shock might be avoided, yet analysts and industry executives cautioned that the ceasefire remains fragile and that risk premiums are unlikely to vanish quickly.

That distinction matters for aviation. Airlines consume refined product, not crude, and jet fuel markets have been hit by both disrupted shipping routes and reduced refining output. Walsh said carriers in Asia have already responded by cutting some flights, carrying additional fuel and adding refuelling stops, particularly on routes exposed to supply uncertainty. Countries including Vietnam, Myanmar and Pakistan were identified among those facing the heaviest strain, underscoring how quickly a Gulf supply shock can ripple through Asian aviation networks.

Pressure has also spread beyond Asia. Italy had to rely on local suppliers to avert temporary jet fuel disruption at four airports after a delayed cargo raised concerns over availability. Although flight operations continued, the episode highlighted how a disturbance in one part of the supply chain can affect airports far from the Gulf. Europe imports more than half of its jet fuel from the Middle East, according to S&P Global figures cited by Reuters, leaving the continent exposed when refinery output, tanker schedules or insurance conditions are thrown off balance.

The broader energy market is facing a similar lag between geopolitical announcements and physical recovery. The US Energy Information Administration said fuel prices could remain elevated for months even if Hormuz reopens, because restarting flows, restoring confidence among shippers and rebuilding inventories take time. It also warned that uncertainty itself would preserve a risk premium in crude and fuel markets. That assessment supports Walsh’s argument that airlines may not enjoy quick relief simply because benchmark oil has retreated from the highs seen during the crisis.

Another complicating factor is the behaviour of refiners and buyers. Chinese independent refiners have begun looking again at Iranian crude cargoes after the price drop, suggesting some buyers are testing whether the truce can restore trade. Yet few deals have been completed, and discounts that once made Iranian barrels attractive have narrowed sharply. At the same time, refined fuel exports from China and Thailand were disrupted during the crisis, while South Korea limited shipments to earlier levels, adding to the scarcity of aviation fuel in Asia.

For governments and carriers, the episode has reinforced a structural vulnerability that extends beyond one ceasefire. Hormuz remains one of the most sensitive chokepoints in world energy trade, and any interruption there can hit crude, liquefied natural gas and refined products simultaneously. The sharp fall in oil prices after Trump’s announcement has offered financial markets a measure of relief, and equity markets in Asia rallied strongly on that signal. But the physical fuel market is moving on a slower clock, one shaped by refinery restarts, shipping confidence, insurance costs and the willingness of suppliers to resume normal export patterns.