Renewed Middle East hostilities pushed Brent crude back above $100 per barrel and drove U.S. jet fuel costs sharply higher. Every U.S. carrier has cut its 2026 earnings guidance in response, with American Airlines' fuel bill alone up more than $2.2 billion year over year.
The fuel price rally of the past two weeks prompted all U.S. carriers to revise their 2026 earnings expectations lower, despite strong summer demand.
Hostilities returned to the Middle East and shattered the three-week-long U.S.-Iran deal to make a deal, sending Brent crude oil prices past $100 per barrel again. Oil and fuel prices had eased for about three weeks while the memorandum of understanding held, but its collapse and the end of the ceasefire reignited the crude and fuel price rallies.
Hormuz keeps crude supply constrained
U.S. jet fuel exports, together with gasoline and diesel, hit record highs this month as refining margins soared with crude supply still constrained at the Strait of Hormuz. The U.S. jet fuel market has been tightening since March, though without the shortage concerns seen in Europe, which in April was supposed to run out of stockpiles within six weeks.
Europe never saw those shortages. Global markets tightened all the same, and prices spiked amid peak seasonal demand during the summer holiday travel.
Southwest shipped fuel through the Panama Canal
West Coast jet fuel stocks were most under stress in the spring, because the region relies more on imports than the other PADDs. Southwest Airlines therefore chartered a vessel to ship jet fuel from Houston to Los Angeles via the Panama Canal, a first for the carrier.
The Trump Administration's waiver of the Jones Act made the shipment possible by temporarily suspending the requirement that cargo moving between U.S. ports travel on a U.S.-owned, flagged and crewed ship. About 12.6 million gallons arrived in Los Angeles at the end of May. Southwest chief financial officer Tom Doxey told CNBC the cargo landed when supply was most constricted: "It brought like a week's supply to the West Coast".
Fuel bills climb by billions
Southwest reported consensus-beating Q2 earnings but said fuel expenses jumped $900 million year-over-year, a $1.17 headwind to adjusted EPS. It now guides full-year 2026 adjusted EPS to $3.25 to $4.25, against a prior expectation of at least $4.00.
American Airlines posted Q2 revenue of $16.7 billion, up 16.3% year over year, the highest quarterly revenue in company history. Yet its fuel expense jumped over $2.2 billion, or 83% from a year earlier, and it now expects full-year adjusted earnings per diluted share between a loss of $0.65 and earnings of $0.65.
United Airlines said last week it expects nearly $6 billion in added fuel expense for full-year 2026 compared to the expectation at the start of the year. Q2 fuel expense jumped $2.3 billion, or 84% year-over-year, though Q2 profit came in near the top end of guidance.
Air fares aren't coming down anytime soon, as airlines amass billions of U.S. dollars of extra fuel costs.
Source: Oilprice.com
Trading involves risk.
Risk Disclaimer
