Oil prices have hit USD 100 a barrel for the first time since May, as renewed fighting between the US and Iran, combined with a new Iran-allied Houthi intervention in the Red Sea, threatens the Strait of Hormuz and the Bab el-Mandeb simultaneously. For airlines, the immediate question is not only where the next barrel of jet fuel comes from. It is whether their fuel hedging positions were locked in with enough warning to matter.
Hedging cushions the shock, but only for those who can access it
Fuel hedging uses financial instruments such as futures, options, and swaps to lock in fuel prices in advance, reducing an airline's exposure to sudden cost increases. According to the International Air Transport Association (IATA), airlines globally have hedged roughly one-third of their expected fuel consumption for 2026, which helps smooth short-term cost volatility but does not eliminate exposure to sustained price increases. Many carriers hedge against crude oil rather than jet fuel specifically, which leaves them exposed to increases in the crack spread, the premium refiners charge for jet fuel over crude.
That exposure is not evenly distributed. A commercial airline has said its "conservative" strategy, with 80 percent of its jet fuel for 2026 to 2027 hedged at USD 668 per tonne, will "insulate" its earnings, against an IATA-estimated European average price of around USD 1,300 per tonne. Smaller carriers and those in less developed fuel markets often have no such buffer. IATA's head of fuel, Daniel Chereau, has noted that airlines with more advanced hedging strategies are better able to cushion fuel price volatility, while refinery crack spreads have surged to record levels, with north-west Europe peaking at over USD 121 per barrel in March compared with around USD 30 per barrel before the geopolitical disruptions began in late February. In Nigeria, industry stakeholders report that hedging is not currently practised by airlines or fuel marketers, leaving operators fully exposed to market volatility.
Hedging is only as good as the warning behind it
Locking in a favourable price requires acting before the market moves, not after. A hedge placed once a strait closure or an escalation is already public knowledge has missed the window in which prices were still low. This is where hedging strategy and geopolitical risk intelligence intersect.
Osprey's forecasting capability is designed to give operators advance notice of the geopolitical and security developments that tend to precede fuel market disruption, such as escalating conflict activity, infrastructure attacks, or airspace closures around key energy transit routes. In the first half of 2023, 43 percent of Osprey's notifications were proactive, meaning they were issued ahead of an event rather than in response to one, with a 98 percent accuracy rate on Osprey's forecasts. This lead time does not forecast the fuel price itself. It gives fuel desks, treasury teams, and route planners a window to review hedging positions and routing decisions before a disruption is priced into the market rather than after.
The value of that lead time compounds when supply chains are already stretched across fewer viable routes. An airline that identifies a likely escalation around a chokepoint before tanker traffic falls, for example, has more options: adjusting exposure, drawing on diversified suppliers, or accelerating fuel purchases ahead of a spike, rather than reacting once refiners and traders have already repriced the market.
Bringing diversification, hedging, and forecasting together
None of these three levers works well in isolation. Diversifying fuel sources reduces dependence on any single corridor or region but does not protect against price spikes in the interim. Hedging smooths cost volatility, but only for the portion of consumption that is hedged, and only if positions are placed with sufficient warning. Forecasting supplies that warning, but its value depends on the operator having a supply and hedging strategy flexible enough to act on it.
Airlines operating in the current environment should treat these as connected disciplines rather than separate functions. Fuel desks benefit from visibility into the same geopolitical developments that inform route planning. Treasury teams reviewing hedge ratios need timely input on where risk is building, not confirmation after prices have already moved.
What this means for planning
The gap between well-hedged and exposed carriers is likely to widen as fuel volatility persists. Airlines with limited hedging capacity, thin stockpiles, or exposure concentrated in a single region carry the greatest risk. Building resilience means combining supplier diversification with disciplined hedging and the earliest possible warning of the events that drive prices, so that decisions are made ahead of the market rather than in response to it.
References
- BBC. Available at: https://www.bbc.com/news/articles/cx2djnzrqk2o
- International Energy Agency. "IEA Executive Director Statement on Oil Markets." Available at: https://www.iea.org/news/iea-executive-director-statement-on-oil-markets
- Straits Times. "Fuel Prices Didn't Skyrocket Before. Here's Why They Could Shoot up This Time." Available at: https://www.straitstimes.com/world/fuel-prices-didnt-skyrocket-before-heres-why-they-could-shoot-up-this-time
- Nikkei Asia. "Hormuz Sees Fewest Tanker Crossings in 2 1/2 Months, Data Shows." Available at: https://asia.nikkei.com/business/energy/hormuz-sees-fewest-tanker-crossings-in-2-1-2-months-data-shows
- FlightGlobal. "Hedging Largely 'Insulates' Ryanair from Fuel-Price Volatility." Available at: https://www.flightglobal.com/archive/2026/05/hedging-largely-insulates-ryanair-from-fuel-price-volatility/
- IATA. "Middle East Disruptions and High Fuel Prices Halve Airline Industry Profitability." Available at: https://www.iata.org/en/pressroom/2026-releases/06-07-middle-east-disruptions-high-fuel-prices-halve-airline-industry-profitability/
- Nairametrics. "Jet Fuel Cost Shocks Hit Airlines with Limited Hedging Options, IATA." Available at: https://nairametrics.com/2026/06/03/jet-fuel-cost-shocks-hit-airlines-with-limited-hedging-options-iata/
- Osprey Flight Solutions. Osprey Forecasts Information Sheet (company materials).