The head of the International Air Transport Association (IATA) has cautioned that global jet fuel supplies are unlikely to return to normal for several months, even if the Strait of Hormuz reopens fully following the recent two-week ceasefire agreement between the US and Iran.
Willie Walsh, IATA Director General, made the remarks while speaking to reporters in Singapore today, Reuters reported.
Walsh noted that while crude oil prices may ease once tanker traffic resumes through the strategic waterway, disruptions to refining capacity in the Middle East would delay the restoration of refined products, including jet fuel.
“If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the disruption to the refining capacity in the Middle East, which is a critical part of the global supply of refined products, and not just jet fuel for other products as well,” Walsh said.
The Strait of Hormuz normally carries around one-fifth of the world’s oil supply.
Its effective closure in recent weeks, amid escalating conflict involving Iran, severely restricted both crude shipments and the output of refined fuels from regional facilities.
Although a temporary ceasefire has raised hopes of safe passage, damage or reduced operations at Gulf refineries mean that rebuilding inventories will not happen overnight.
Walsh added that jet fuel prices are expected to remain slightly elevated for some time, even as crude prices fall, because of the specific impact on refining.
He distinguished the current situation from previous shocks such as the Covid-19 pandemic.
“This is not similar to Covid. This is not a crisis anywhere close to what we experienced [with Covid],” he said. “In Covid, capacity reduced by 95 per cent because borders closed. We’re nowhere near that.”
Jet fuel typically accounts for about a quarter of airline operating costs.
Carriers have already begun adjusting operations, with some introducing additional refuelling stops on long-haul routes and others cutting less profitable services.
Gulf-based airlines, which rely heavily on the region’s refining output, are expected to face particular pressure, although Walsh suggested their lost capacity would be only partially offset by other carriers.
The warning comes as airline shares rallied on news of the ceasefire and potential reopening of Hormuz.
Industry executives and analysts, though, caution that any relief for passengers in the form of lower fares may be delayed.
IATA represents around 350 airlines that carry more than 80 per cent of global air traffic.
While the organisation described the fuel shock as “manageable” rather than existential, it stressed that prolonged high costs could weigh on the industry’s post-pandemic recovery.
Walsh emphasised that full normalisation would require both the reopening of the strait and the gradual ramp-up of refining activity.
In the meantime, airlines are expected to continue careful fuel management and route planning.
