Global airline stocks retreated on Wednesday after the International Air Transport Association (IATA) warned that the industry faces its worst profit squeeze since the COVID-19 pandemic in 2026. A severe fuel supply shock triggered by the closure of the Strait of Hormuz has tightened energy markets, pushing operating costs higher and weakening economic growth. IATA projects airline net profit will fall to $23 billion this year, reducing the industry's net margin to 2%, the weakest level recorded since the global health crisis.

The disruption, which began on February 28, removed approximately 10 million barrels per day of crude oil supply from global markets. When including refined products and liquefied natural gas, the outage affected roughly 15 million barrels per day of energy supply, briefly driving crude prices toward $150 per barrel. The aviation sector has been hit particularly hard, with jet fuel prices roughly doubling since late February. Jet fuel crack spreads reached a record $80 per barrel in April as refinery outages and constrained throughput limited supply.

Jet Fuel Costs Surge

Hormuz-linked flows account for about one-fifth of global seaborne jet fuel trade. This loss has intensified supply competition across Europe, the U.S. West Coast, and parts of Asia, increasing the risk of regional shortages. The resulting price surge is the primary driver behind the deteriorating financial outlook for carriers worldwide.

Passenger And Cargo Growth Slow

IATA now expects global passenger traffic to grow just 2.1% in 2026, a sharp slowdown from recent years. Higher fuel costs, airspace disruptions, and longer flight routes are weighing on demand, though consumer willingness to travel remains relatively resilient. Regional performance is diverging; the Middle East is expected to face a significant contraction due to airspace restrictions, while Africa and Asia-Pacific could benefit from traffic rerouting.

Air cargo demand is also slowing. IATA forecasts cargo volumes will rise only 0.7% in 2026 as the conflict disrupts hub connectivity and limits available capacity.

Profitability Under Pressure

While airline revenue is projected to rise 9.4% in 2026, the surge in expenses will significantly erode profitability. The association warned that the energy shock is likely to slow global GDP growth to about 2.5% in 2026, down from around 3% previously. Simultaneously, global inflation is expected to push above 5%, increasing the risk of stagflation.

Airline Stocks Retreat On Weaker Outlook

The downgraded outlook pressured shares of major carriers. Alaska Air Group fell 3.61% to $43.50, while United Airlines Holdings declined 3.27% to $106.05. Frontier Group Holdings lost 3.46% to $6.13, American Airlines Group slipped 2.31% to $13.76, and Delta Air Lines dropped 2.36% to $79.25. Southwest Airlines shed 2.39% to $42.14.

Other notable decliners included JetBlue Airways, which fell 1.63% to $4.84, and Ryanair Holdings, which lost 2.03% to $56.82. Copa Holdings declined 1.62% to $133.18, SkyWest slipped 1.14% to $86.78, and LATAM Airlines Group eased 1.02% to $48.76.