The Middle East conflict hits aviation hard, and Hong Kong’s flagship carrier faces a testing year
When War Disrupts the Skies
The US-Israeli military operation against Iran that began in late February 2026 has sent oil prices surging and airline stocks plummeting across Asia and Europe. Brent crude rose above 80 dollars a barrel on Tuesday on concerns about disrupted supply through the Strait of Hormuz — the narrow waterway through which roughly 20 percent of the world’s oil passes. For airlines, jet fuel typically represents between 20 and 30 percent of operating costs. A sustained oil price shock of this scale, arriving alongside the closure of major Gulf hub airports including Dubai for a fourth consecutive day, represents one of the most severe simultaneous cost and operational shocks the industry has experienced since the COVID-19 pandemic.
How Airlines Are Hedged
The impact on individual carriers depends substantially on their fuel hedging strategies — the financial instruments airlines use to lock in future fuel prices and reduce exposure to sudden market swings. Among the best-protected carriers is Air France-KLM, which adjusted its hedging policy in February to cover 87 percent of one-year fuel consumption, extending its hedging horizon to eight quarters. EasyJet reported hedging 84 percent of its fuel needs for the first half of 2026. Ryanair’s CEO said the carrier was 84 percent hedged at approximately 67 dollars a barrel for the current quarter. Qantas reported 81 percent of its fuel hedged for the second half of its financial year.
Cathay Pacific and Hong Kong’s Exposure
Hong Kong’s flagship carrier, Cathay Pacific, had hedged fuel into the second quarter of 2027, covering around 30 percent of costs until mid-2026. That relatively modest hedging level — compared to European carriers that are hedged at 80 to 87 percent — leaves Cathay more exposed to the current price spike. Cathay Pacific shares closed down approximately 3 percent on Tuesday. The Iran conflict has also disrupted flight routes, with Russian airspace already off-limits to many Western carriers since 2022 and Middle Eastern corridors now constrained by the conflict. Reuters reported a surge in bookings and ticket prices on routes including Hong Kong to London as passengers sought alternatives to Gulf airlines.
China’s State Airlines: A Different Approach
China Eastern Airlines presents a striking contrast to its Western counterparts. The state-owned carrier made no jet fuel hedging transactions in the first half of 2025 and held no outstanding hedging contracts as of June 2025. That decision — or non-decision — leaves it maximally exposed to the current spike. China Eastern shares fell between 2 and 4 percent on Tuesday. The contrast illuminates something important about how state ownership affects commercial risk management: a carrier answerable to the market must hedge; a carrier answerable primarily to the party may not feel the same pressure.
The Bigger Picture
Oil price shocks from geopolitical conflict are not new to aviation. What is new is the cumulative pressure on an industry that has spent five years recovering from the pandemic, now facing route disruptions from two separate conflict zones simultaneously — Ukraine and the Middle East. The International Air Transport Association tracks fuel cost data and hedging trends across the global airline industry, and its data consistently shows that carriers with disciplined hedging programmes weather volatility better than those without. For Hong Kong specifically, the Iran crisis adds another layer of uncertainty to an economy that has already absorbed significant structural shocks. The city’s aviation sector is a critical economic pillar. How Cathay Pacific and the broader aviation industry navigate this oil shock will have direct consequences for Hong Kong’s economic performance through the rest of 2026.
Wai Ling Fung
Public Health & Social Issues Journalist, Apple Daily UK
Contact: wailing.fung@appledaily.uk
Wai Ling Fung is a public health and social issues journalist with professional experience covering health policy, social welfare systems, and community resilience within Chinese-speaking societies. She received her journalism education at a highly regarded Chinese journalism school, where she trained in evidence-based reporting, data interpretation, and ethical standards for sensitive coverage.
Her work at Apple Daily and other liberal Chinese newspapers includes reporting on healthcare access, pandemic response, elder care, disability rights, and public resource allocation. Wai Ling’s reporting is grounded in primary documentation, expert interviews, and direct engagement with affected communities, ensuring accuracy and relevance.
She has operated in fast-moving newsroom environments where misinformation carries real consequences, giving her practical experience in verification under pressure. Her stories are known for precise sourcing, careful contextualization, and restraint in tone, especially when covering medically or socially sensitive topics.
Wai Ling’s authority is established through sustained publication within reputable media organizations and adherence to strict editorial review processes. She follows correction and transparency protocols that reinforce reader trust.
At Apple Daily UK, Wai Ling Fung delivers responsible, experience-driven journalism that helps readers understand complex public health and social issues through verified facts and professional judgment.
