Posted Originally on: Oct 9, 2026 by Martin Armstrong |

Ryanair chief Michael O’Leary says jet fuel is now about 50% more expensive than before the Iran war and expects those elevated costs to persist for another 12 to 18 months. Reuters reports that he has previously warned ticket prices could rise by as much as 20% next summer. These are forecasts, but the pressure on airline margins is already here. “We are all facing an enormous cost challenge next year,” O’Leary said.

People assume that once the fighting stops, everything returns to normal. A ceasefire does not repair a refinery or restore damaged infrastructure overnight. Nor does a retreat in crude oil automatically produce an equivalent decline in the price of usable aviation fuel. Airlines need the finished product, delivered where their aircraft operate. You cannot fly a plane on a press release announcing that the oil market has stabilized.

Fuel hedging can buy an airline time, but it cannot permanently insulate the business from higher costs. As those contracts expire, management must decide how much it can pass to passengers and which routes remain worth operating. Raise fares too far and customers reconsider the trip. Absorb the increase and profitability suffers. Cheap tickets depend upon the economics of providing them, however much politicians would like to pretend otherwise.

Lufthansa is facing the same squeeze. CEO Carsten Spohr expects this year’s additional fuel costs to exceed the €1.5 billion previously projected, despite extensive hedging. The airline maintained its operating profit forecast, but rising costs are weighing on its turnaround plans. You can have passengers willing to fly and still struggle to improve profitability when the cost of carrying them keeps climbing. Hedging buys time; it does not manufacture fuel or permanently remove the expense. Those who believe an airline can simply absorb every increase should try running one.

EasyJet is already responding by cutting flights. The Financial Times reports that the airline will remove another 600,000 to 700,000 seats from its winter schedule, following an earlier reduction of about 700,000, to limit spending on expensive fuel. Routes that made sense at one fuel price become less attractive at another, and management pulls back. Fewer seats mean fewer opportunities to travel, with potential consequences for the hotels, restaurants, and businesses waiting for those visitors. Governments authorize military operations, and a holiday business hundreds of miles away discovers that its customers have fewer flights available to reach it. The consequences reach well beyond the airline. That is how an energy shock works its way through an economy, taking income from one business after another.

I have little patience for governments that discuss war as though its economic consequences can be contained within the country being attacked. Energy moves across borders, and so does the damage when its supply is disrupted. The public pays through fuel bills, freight charges, food prices, and now the cost of visiting family or taking a holiday. Officials can authorize another operation with a signature. The businesses trying to remain profitable must work out how to pay for the consequences.

Categories:Energy