Wall Street closes at a record for the first time since end of January
Since the U.S. and Israel launched strikes on Iran on February 28, jet fuel prices in the U.S. have more than doubled. According to data from the Energy Information Administration (EIA), the year-to-date percent change in U.S. jet fuel prices stood above 120% as of the end of March.
Oil markets reacted swiftly to President Donald Trump’s address to the nation last week, with U.S. crude surging 12% to over $113 per barrel and Brent jumping 8% above $109. The national average for a gallon of gasoline crossed $4.00, the highest since Russia’s invasion of Ukraine in 2022.
There’s no sugarcoating it: for the aviation industry, which was on track for a record $41 billion in global profits in 2026, this is a serious headwind.
But it’s important that I point out that this isn’t the first shock airlines have had to face. As I see it, the industry’s long-term investment case remains firmly intact.
The Fuel Problem
Jet fuel typically accounts for somewhere between 20% and 40% of an airline’s total operating costs, depending on the carrier, its routes and the efficiency of its fleets. Unlike labor costs or lease payments, fuel prices are set by global commodity markets. They’re beyond any single airline’s control, and they can change very fast, as we saw in March.
What makes the current situation particularly impactful, of course, is the closure of the Strait of Hormuz, which handles an enormous share of the world’s seaborne oil trade. Looking just at China, the world’s number one oil importer, about 38% of its supply originates in the Persian Gulf, according to CLSA research.
Meanwhile, the UK, which relies on Kuwait for roughly 25% of its jet fuel, is among the most exposed.
The U.S., by contrast, is in a far stronger position than the headlines suggest, as I mentioned in a previous post.
Record U.S. Oil Production
The number I want you to remember is 13.6 million barrels per day.
That’s the new record for U.S. crude oil production in 2025, up 3%—or 350,000 barrels per day—from the year prior, according to the EIA. The U.S. is the world’s largest oil producer, and it’s operating at full strength.
U.S. refiners are already churning out approximately 1.9 million barrels of jet fuel daily, a record for this time of year. With domestic airlines consuming about 1.6 million barrels a day, that leaves roughly 300,000 barrels available for export.
CLSA developed an equally weighted “vulnerability score” across six indicators, including direct and indirect oil import reliance on the Gulf, reserve levels, energy’s weight in consumer inflation baskets and balance of payments strength. The firm found that the U.S. ranked as the least vulnerable country to a Persian Gulf supply disruption, with a z-score of 4.31. China and Hong Kong were close behind. Thailand, the Philippines and Vietnam were the most exposed.
In other words, while this conflict is genuinely disruptive for global aviation, the American market has a strong buffer that most of the world doesn’t.
To Hedge or Not to Hedge
Like countries, not all airlines are equally exposed to the spike in fuel prices.
European carriers entered this crisis far better projected. According to Aerospace Global News, easyJet hedged 84% of its fuel for the first half of 2026. Air France, IAG and Ryanair all carry solid hedging positions through most of the year.
U.S. carriers, by contrast, have collectively walked away from fuel hedging over the past few years. As of the end of 2024, three of the four largest U.S. airlines maintained zero hedging positions. Southwest, once considered the gold standard for airline fuel hedging—saving an estimated $3.5 billion between 1998 and 2008—officially discontinued its program in December 2024.
Delta retains some protection through its Monroe Energy refinery in Pennsylvania. The refinery covers a large share of its fuel consumption. But it’s not shielded from swings in crude prices.
When this shock resolves itself—and it will, eventually—unhedged carriers will benefit from lower spot prices immediately. They won’t be locked into above-market contracts the way some of their European rivals may find themselves if prices fall.
Demand Is Holding
The good news is that flight demand appears to be holding. Global passenger traffic expanded 6.1% year-over-year in February, according to a new report by the International Air Transport Association (IATA). That’s up from January’s 4.0% gain.
United Airlines CEO Scott Kirby told reporters last week that customers are still booking, even as carriers pass higher fuel costs along in the form of fare increases. Airfares have jumped, particularly on long-haul and last-minute bookings, but the fundamental demand for travel has not collapsed.
This tracks with what we’ve seen in past fuel crises. Think of the oil shock of 2008, the aftermath of September 11, the covid pandemic. Each time, the sector faced what looked like an existential threat, and each time, it recovered. The industry’s ability to adjust capacity, focus on profitable routes and work through supply-side shocks has been proven repeatedly.
Airlines are doing this now, cutting unprofitable routes and grounding less fuel-efficient aircraft.
The Road Ahead
I believe the market is pricing in a prolonged crisis. The Pentagon is reportedly preparing for additional operations, while Trump has signaled he may be willing to end U.S. involvement without fully reopening the Strait of Hormuz. Public support for the conflict is declining sharply, with 59% of Americans now opposing the war, according to a YouGov poll conducted March 27-30.
In the meantime, the U.S. sits on record domestic oil production, and global passenger demand, while under pressure, has not broken.
Again, the commercial aviation sector has survived oil embargoes, terrorist attacks, financial crises and global pandemics. It’s not going to be grounded by a fuel spike, however severe. I believe the smart money will be watching for the moment when fear peaks, because in the past, that’s often represented the best opportunity.
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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (03/31/2026): easyJet PLC, Air France-KLM, Ryanair Holdings PLC, Southwest Airlines Co., Delta Air Lines Inc., United Airlines Holdings Inc.
