When U.S. and Israeli forces struck Iran on February 28, 2026, the ripple effects hit commercial aviation almost instantly. Jet fuel for routes through Chicago, Houston, Los Angeles, and New York averaged $4.88 per gallon as of early April — nearly double the price from the day before the conflict began, according to data from Argus Media published by industry group Airlines for America.
Fuel is airlines’ single largest expense after labor. When it doubles, carriers face a binary choice: absorb the hit and watch earnings compress, or pass costs to consumers. In 2026, the major U.S. carriers have chosen the latter — and swiftly.
The Fee-Hike Cascade: United, JetBlue, and Delta
United Airlines (UAL) raised its first checked bag fee by $10 on April 3, bringing the price to $45 if prepaid or $50 within 24 hours of a domestic flight. It was the airline’s first bag fee increase since February 2024. United’s move came just days after JetBlue Airways (JBLU) hiked its checked bag fees by $4 to $9 per bag — depending on booking timing — citing rising operating costs while pledging to keep base fares competitive.
Delta Air Lines (DAL) has taken a slightly different approach. CEO Ed Bastian told CNBC that Delta has room to raise base airfares directly, rather than rely solely on ancillary fees. “Even with the war going on, our revenues, our bookings are up 25% year over year,” Bastian said in early March. Delta had not announced a formal bag fee hike as of early April but signaled flexibility to adjust pricing as fuel costs evolve.
The cost-passing is spreading beyond aviation. Amazon announced a 3.5% “fuel and logistics-related surcharge” for third-party sellers using its fulfillment services — a signal that normalizing energy surcharges is becoming an economy-wide response, not just an airline phenomenon.
The IEA’s Warning: April Could Be Worse
The supply backdrop is deteriorating, not stabilizing. International Energy Agency Executive Director Fatih Birol warned that the oil crunch will intensify in April. Because some cargo ships were already in transit through the Strait of Hormuz before the war began, March’s figures were partially cushioned by pre-war inventory flows.
“In April, there is nothing,” Birol said on the “In Good Company” podcast hosted by Norges Bank Investment Management CEO Nicolai Tangen. “The loss of oil in April will be twice the loss of oil in March.”
The IEA estimates the conflict has removed approximately 12 million barrels per day from global oil markets — more than twice the combined supply loss seen during the 1973 oil embargo and the 1979 Iranian Revolution. In response, the IEA’s 32 member nations have already agreed to release a record 400 million barrels from emergency stockpiles, and Birol indicated a second release is under active consideration. Jet fuel and diesel are the most acute bottlenecks, with Asia already feeling the pinch and Europe expected to follow by late April or early May.
How Airline Stocks Are Positioned
Airline equities have been caught in a cross-current since late February. On one hand, demand has remained surprisingly resilient — Delta’s booking surge and United’s confidence in raising fees both point to consumers still willing to fly. On the other hand, cost inflation is compressing margins in a sector that historically operates on thin single-digit operating margins.
The consensus view among sector analysts is that carriers with stronger balance sheets, larger loyalty programs, and greater premium-class revenue exposure are better positioned to weather the fuel shock. Airlines with substantial credit card co-brand revenue — which is largely decoupled from fuel costs — have a meaningful structural buffer. United’s MileagePlus and Delta’s SkyMiles programs generate billions in annual revenue regardless of oil prices, acting as an effective hedge against fuel-driven margin compression.
Low-cost carriers face comparatively greater headwinds. Their core value proposition is price competitiveness, and fuel surcharges or bag fee hikes erode that advantage directly. JetBlue, which has been navigating a multi-year operational restructuring, is particularly exposed given its narrower margins and more limited premium revenue base.
The Federal Reserve Factor: No Policy Rescue
Adding complexity for airline-sector investors is the Federal Reserve’s posture. Fed Chair Jerome Powell indicated this week that the central bank does not plan to cut rates in response to the energy shock, noting that short-term oil price spikes are typically “looked through” when assessing long-term inflation. The market briefly priced in the possibility of a rate hike — given the inflationary pressure from oil — before Powell pushed back on that scenario as well.
Daken Vanderburg, chief investment officer at MassMutual Wealth, framed the bind clearly: “Policy is likely not riding to the rescue like it did during the Covid era.” With the Fed on hold and fiscal stimulus politically difficult in an election year, airlines and other fuel-intensive businesses are largely absorbing the shock through their own pricing and operational decisions.
Herman Nieuwoudt, president of IFS Energy & Resources, offered a structural read: “This is headed toward sustained, compounding cost pressure across every industry that touches fuel, which is effectively every industry.” He argued that companies that can adapt operationally in real time will fare significantly better than those relying purely on surcharges — which he predicted would face a customer and competitive reckoning within two to three quarters.
What to Watch in Q2 2026
Several variables will shape the airline sector’s trajectory through the second quarter:
- Strait of Hormuz status: President Trump’s April 2 address suggested U.S. forces could depart Iran “in two or three weeks,” triggering a brief relief rally across financial markets. A genuine reopening of the strait would be the single biggest catalyst for jet fuel cost normalization.
- Demand durability: If consumers begin pulling back on discretionary travel as higher costs compound across groceries, gas, and airfares, load factors will fall even as costs remain elevated. The lag effect on travel bookings typically takes 60 to 90 days to materialize.
- IEA reserve strategy: A coordinated second release of strategic petroleum reserves could temporarily dampen jet fuel prices, providing airlines short-term margin relief heading into the summer travel season.
- Q1 2026 earnings: Results from Delta, United, and Southwest, expected in mid-April, will provide the first comprehensive picture of how the fuel shock hit operating margins during the conflict’s first full month. Guidance for Q2 will be closely watched for signals on pricing power and demand trends.
The Bottom Line
The Iran war has created one of the most challenging cost environments in commercial aviation history. Jet fuel has nearly doubled since late February, forcing carriers to raise ancillary fees at a pace not seen since the post-pandemic recovery. The major legacy airlines have demonstrated meaningful pricing power so far, supported by demand that has — so far — held firm. But the IEA’s warning that April will bring an even deeper supply crunch suggests the full financial impact on airline earnings has not yet been absorbed.
For market observers tracking the sector, the divergence between legacy carriers with premium exposure and loyalty revenue versus price-sensitive low-cost carriers is shaping up as one of the defining dynamics of 2026’s second quarter.
Disclosure: This article was produced with AI assistance and reviewed before publication. It is for informational purposes only and is not investment advice.