Airlines brace for higher fares as fuel volatility reshapes global travel

Travel insurers could face increased claims costs and higher exposure to disruption-related payouts as rising jet fuel prices linked to the Iran conflict drive global airfare inflation, according to warnings from the International Air Transport Association (IATA).

Speaking to the BBC, IATA Director General Willie Walsh said higher ticket prices were now “inevitable” as airlines continue to absorb elevated jet fuel costs caused by disruption around the Strait of Hormuz – a critical route for global energy supplies.

Walsh also warned that the impact could continue well into next year, even if the shipping route reopens quickly, due to ongoing disruption affecting oil supplies and refining operations.

The warning comes as airlines globally continue to adapt schedules, capacity, and operational planning in response to sustained fuel volatility and wider geopolitical uncertainty.

Airlines in multiple regions have already begun adapting their networks.

In the Asia-Pacific region, Qantas and Jetstar recently extended schedule changes and capacity reductions into fiscal year 2027, citing continued high fuel costs and operational pressures linked to the Middle East situation.

Meanwhile, Emirates said military activity in the Gulf had “massively disrupted global commercial air traffic” during the final month of its financial year, although the carrier noted it had secured longer-term fuel resilience through hedging and supplier agreements.

European airlines are also adjusting operations amid wider cost pressures. Ryanair recently announced the closure of its Thessaloniki base for winter 2026, removing 700,000 seats and 12 routes from the market.

Consequently, rising air fares may leave some travellers unknowingly underinsured if cancellation limits or declared trip values no longer reflect the true cost of flights and package holidays.

The issue could become particularly acute for long-haul travellers, cruise passengers, and multi-destination itineraries, where replacement flight costs may rise significantly during periods of reduced airline capacity or schedule disruption.

At the same time, insurers and assistance providers may face increased exposure linked to:

• Flight delays and cancellations
• Missed onward connections
• Extended accommodation claims
• Itinerary rearrangements
• Stranded traveller support
• Higher repatriation and rebooking costs.

The situation also highlights the increasingly interconnected nature of global travel risk. Even travellers with no direct connection to the Middle East may still experience secondary disruption through fuel pricing, aircraft redeployment, schedule consolidation, or reduced route availability.

Industry observers have also warned that some travellers may wrongly assume all airline disruption linked to operational or fuel-related issues is automatically covered under standard travel insurance policies, despite exclusions and sub-limits varying widely between providers.

While governments and aviation bodies continue to stress there is no immediate cause for panic, the wider industry increasingly expects elevated fuel costs and operational uncertainty to remain a feature of the market into 2027.

Fuel-related pressures are already reshaping operational risk discussions across the sector.