The economics of the Strait of Hormuz

The Middle East crisis looks set to be a defining moment for the aviation insurance market and the airline industry, testing operational resilience for both. The insurance market response has maintained coverage throughout the volatility, and airlines have managed the crisis without major civilian aircraft claims so far, demonstrating mature crisis management. Yet outside of this crisis, significant market pressures remain evident.

The escalation of tension in the Middle East has exposed the fragility of aviation fuel supply chains and shown how quickly disruption can send shockwaves through airline operations and economies around the world.

Supply chains: Only as strong as the weakest link

In normal conditions, roughly one fifth of the world’s oil supply, around 20 million barrels per day, transits the Strait of Hormuz, ^[1] along with significant volumes of refined petroleum products, including jet fuel and blending components. Europe is particularly reliant on fuel originating in or transiting through the Gulf, with a substantial proportion of aviation kerosene imports linked directly or indirectly to Hormuz flows. ^[2]

According to shipping and energy market data, daily vessel transits have fallen by approximately 90–95% since the ongoing tensions escalated into conflict in late February 2026. In practical terms, activity fell from around 130 vessels per day to less than 10 at points during March and early April. While limited, selective movements continue under heightened security (and with elevated war-risk insurance premiums for these vessels), the result has been a dramatic reduction in physical fuel leaving the region.^[3]

For aviation, this matters enormously. Unlike many other sectors, airlines cannot substitute fuel, defer its use, or operate around shortages for long. Jet fuel is the ultimate non-negotiable input.

From maritime disruption to airport-level rationing

The knock-on effects are no longer theoretical. In early April, Air BP Italia, one of Italy’s principal aviation fuel suppliers, announced fuel supply issues that led to rationing at multiple Italian airports, including Bologna, Milan Linate, Treviso and Venice.^[4] Italian authorities issued Notices to Airmen (NOTAMs) restricting fuel uplifts, prioritizing state, medical and longer-haul flights.^[5] Short-haul services faced strict caps. Several other airlines globally also announced reduced flight operations in the face of constrained supply and raised costs.

The immediate fuel shortage in Italy appears to have been averted as alternative suppliers stepped in to fill the gap,^[6] but the incident highlights a broader point: fuel resilience often fails first at the distribution level. Even where national inventories appear adequate on paper, bottlenecks in shipping, refining, blending and inland logistics can quickly translate into airport-level constraints—particularly at airports with limited storage or dependence on a single supplier.

Once rationing is introduced, airlines face immediate operational decisions: tanker fuel from other locations (i.e. carrying sufficient fuel for both legs of a journey, adding weight), introduce technical fuel stops, swap aircraft types or cancel services entirely. Each option carries cost as well as efficiency and operational trade-offs.

Why aviation fuel is uniquely exposed

Aviation fuel supply chains are unusually sensitive for three reasons:

1. Jet fuel must meet tightly controlled specifications and cannot be easily substituted.
2. Aviation operates on just-in-time delivery models, with limited buffer stocks at many airports.
3. Aircraft are among the most fuel-intensive assets in constant motion: a narrow‑body jet can burn several tons of fuel per hour, while long-haul, wide-body aircraft consume many tens of tons per sector.

In energy-use terms, the aviation industry accounts for around 8% of total global fuel consumption, compared to 7% for marine and 46% for road transport.^[7] This comparison matters. Aviation uses far less fuel than road transport in aggregate, but its dependence on uninterrupted supply is absolute. A shortfall of even a few percentage points can ground aircraft immediately.^[8]

Airlines as critical economic infrastructure

Airlines are not just transport providers; they are enablers of the modern global economy. Aviation supports international trade, tourism, business mobility, supply chains and time-critical cargo. According to estimates from before the current conflict, aviation directly and indirectly supports tens of millions of jobs globally and contributes several trillion dollars to global GDP each year.^[9]

When fuel shortages affect airline operations, the consequences cascade far beyond the airport perimeter. Flight cancellations and reduced connectivity affect exporters, disrupt manufacturing schedules, delay high-value cargo and constrain labor mobility. Regions that rely on air links, such as island economies, tourism-dependent markets and export hubs, are particularly vulnerable.

In this context, aviation fuel security is a matter of economic resilience, not simply airline profitability.

Insurance, risk transfer and systemic exposure

From an insurance perspective, the Strait of Hormuz and the wider Middle East conflict highlight the concept of concentration risk; a single geographic chokepoint that underpins energy supply for multiple industries simultaneously. Marine, aviation, trade disruption, political risk and war risk policies are all having to respond to different aspects of the same event.

For global airlines, fuel shortages increase the frequency and severity of operational disruptions, claims under delay and cancellation covers, and potential disputes around contractual performance. Insurers are also indirectly exposed through broader economic deterioration affecting airline balance sheets and those of several other lines of business.

In terms of the Middle East itself, while the ambition is to maintain a semblance of a normal airline schedule, the heightened operational risk presents aviation insurers with increased risk of loss and so they have responded through the application of increased premiums. Similarly, the rising cost of war-risk insurance for vessels transiting Hormuz has discouraged shipping, which reinforces physical shortages and amplifies systemic risk.^[10]

Can the risk be mitigated?

There are short-term mitigation strategies for this fuel supply challenge, but none offer a complete solution. Pipeline bypasses, such as Saudi Arabia’s East-West pipeline or the UAE’s Abu Dhabi-Fujairah pipeline, can divert fuel away from Hormuz, but their combined capacity covers only a fraction of normal flows.^[11] Strategic reserves provide temporary relief but are not designed for prolonged disruption.

For airlines, mitigation focuses on fuel diversification, contractual flexibility, storage access and operational contingency planning. For countries and their airports, resilience depends on supplier diversity, infrastructure redundancy and international coordination.

The Strait of Hormuz illustrates a fundamental truth about the modern global economy: efficiency has come at the expense of resilience. Aviation depends on finely tuned, globally interconnected supply chains with limited slack. When those supply chains are disrupted, the effects radiate outward, from grounded aircraft to potentially higher food bills, tighter mortgage conditions and slowed economic growth.

For airlines, insurers, policymakers and consumers alike, the message is clear: What happens in the Strait of Hormuz does not stay in the Strait of Hormuz. Aircraft can reroute airspace, swap crews and recover schedules, but they cannot operate without kerosene. Essentially, if the fuel stops flowing, everything else in aviation quickly becomes academic.

Footnotes

1. Amid regional conflict, the Strait of Hormuz remains critical oil chokepoint. Return to article undo
2. Hormuz disruption deepens global economic strain across trade, prices and finance. Return to article undo
3. dramatic reduction in physical fuel leaving the region. Return to article undo
4. Italy warns of jet fuel shortages at four airports, others may follow suit. Return to article undo
5. Jet fuel rationing introduced at four airports in Italy. Return to article undo
6. Local Suppliers Avert Jet Fuel Disruption at Four Italian Airports, Sources Say. Return to article undo
7. Fuels in Aviation and Shipping . Return to article undo
8. U.S. jet fuel consumption in 2023 remained below the pre-pandemic high. Return to article undo
9. Air Transport Action Group: Facts and Figures . Return to article undo
10. The Strait of Hormuz Conflict – A Claims Perspective from an Insurer. Return to article undo
11. HormuzTracker. Return to article undo