IEA warns stocks could hit a tipping point in June as the Strait of Hormuz remains shut, threatening flight cancellations and record fares at the peak of the corporate travel calendar.
Business travellers are bracing for widespread flight cancellations and a further leg up in fares this summer after the International Energy Agency (IEA) warned that Europe has no more than six weeks of jet fuel supplies in the tank.
The Paris-based agency, which advises 32 member states on energy security, said stockpiles would reach a tipping point in June unless the continent manages to replace at least half of its lost Middle Eastern imports.
The warning will sharpen concerns among corporate travel managers already wrestling with surging airfares and a febrile schedule. The Strait of Hormuz, the world’s most important artery for jet fuel shipments out of the Gulf, has been effectively closed by Iran for more than six weeks in response to American and Israeli strikes, sending the benchmark European jet fuel price to a record $1,838 (£1,387) a tonne at the start of April. That is more than double the $831 recorded before the conflict began.
Fatih Birol, the IEA’s executive director, told the Associated Press that flight cancellations could follow if supplies remain blocked. In its latest monthly oil market report, the agency said the crisis had “thrown a proverbial wrench into the inner workings of the aviation fuel markets”.
Europe has historically leaned on the Middle East for around three-quarters of its jet fuel imports, an exposure that has left the region acutely vulnerable to the closure. Refineries in Korea, India and China, often cited as the obvious alternative suppliers, are themselves heavily dependent on Gulf crude, leaving travel buyers few straightforward workarounds.
European governments are now scrambling to secure alternative cargoes, with the IEA pointing to a “rapid acceleration” in American jet fuel exports in recent weeks. Even so, the agency cautioned that if every additional US shipment were routed to Europe, it would cover little more than half of the shortfall.
“Physical shortages may emerge at select airports, resulting in flight cancellations, and demand destruction,” the IEA said, if Europe cannot replace more than half of its Middle Eastern imports. Closing three-quarters of the gap would push the crunch point back to August, but the squeeze would still arrive mid-summer, at the height of the corporate and leisure travel calendar.
“European markets will need to work harder to attract further replacement cargoes from elsewhere if sufficient inventory is to be maintained over the summer months,” the agency added.
Fuel typically accounts for between 20 and 40 per cent of airline operating costs, and carriers have been pushed into emergency measures as prices climb. EasyJet said in a Thursday trading update that it had absorbed an additional £25m in fuel costs in March alone because of the Middle East conflict, even though it had hedged more than three-quarters of its requirement at pre-war prices. The low-cost carrier cited “near-term uncertainty around fuel costs and customer demand”.
Industry analysts expect full-service carriers with heavier long-haul exposure to come under still greater strain, with corporate fares on key city pairs already climbing sharply and premium cabin availability tightening into the summer months.
The European Commission insisted this week that there was “no evidence of fuel shortages” within the European Union, although a spokesperson conceded that supply issues could arise “in the near future”. Crude oil deliveries to EU refineries were described as “stable with no need for additional stock releases at present”. Brussels confirmed that its oil and gas coordination groups were meeting weekly, with further energy measures to be announced by the Commission president next week.
Airports Council International, the trade body representing Europe’s airports, has written to the Commission warning that jet fuel shortages could materialise if the Strait of Hormuz does not reopen within three weeks.
For corporate travellers and the buyers who book them, the implications are unwelcome: higher fares, fewer seats and a rising risk of day-of-travel disruption on intra-European and long-haul routes just as the peak season arrives.
Travel managers are being urged to dust off continuity plans, diversify preferred-carrier portfolios, stress-test supplier contracts and, where possible, lock in fares before conditions deteriorate further. With the IEA’s six-week clock now ticking, the summer business travel season looks set to be defined less by where companies fly than by whether they can get there at all.