Middle East Conflict Squeezes Air Cargo Capacity and Lifts Rates

Middle East conflict-driven capacity cuts have sharply tightened air cargo conditions, pushing up global freight rates despite still-solid demand growth and earlier relief from lower fuel prices.

Air cargo entered 2026 with firm underlying demand and record January capacity, but the regional conflict in the Middle East has become the pivotal driver for the Transpot Middle East market. Capacity reductions at key Gulf hubs, diversions on Asia–Europe corridors and disruptions to maritime flows through the Strait of Hormuz are amplifying rate pressure. At the same time, the recent surge in jet fuel prices linked to the broader Iran war and oil market disruption is reversing the cost tailwind that airlines enjoyed at the start of the year. Shifts in trade policy and e-commerce regulation add another layer of complexity, forcing logistics planners to reassess routing, mode and sourcing choices.

📈 Prices & Rate Dynamics

Global air cargo rates have risen markedly on lanes overlapping the Middle East and South Asia. Freightos Air Index data show South Asia–North America and South Asia–Europe rates up around 50%, to roughly €5.50–€6.00/kg and €3.70–€4.00/kg equivalent respectively, while Southeast Asia–Europe and China–US routes have climbed about 20%, with Europe lanes now above approximately €3.70–€4.00/kg and China–US above €6.50–€7.00/kg.

Initially, lower aviation fuel prices in January (around US$90/bbl jet fuel, down 6.5% year-on-year) helped depress unit revenues. That cushion has eroded rapidly as the 2026 Iran war and the Strait of Hormuz crisis have lifted oil and jet fuel benchmarks to multi‑year highs, driving airlines worldwide to implement fuel surcharges and fare increases. For shippers using Middle East routings, this means the combination of structural capacity loss and higher surcharges is likely to keep spot and contract rates elevated through the near term.

📊 Snapshot of Key Air Freight Benchmarks (approx., EUR/kg)

Lane	Recent Avg. Level (EUR/kg)	Change vs. Pre‑conflict
South Asia → Europe	3.7 – 4.0	≈ +50%
South Asia → North America	5.5 – 6.0	≈ +50%
Southeast Asia → Europe	3.7 – 4.1	≈ +20%
China → US	6.5 – 7.2	≈ +20%

🌍 Supply, Demand & Network Shifts

Fundamentally, the air cargo market remains demand‑positive. Global volumes in January rose 5.6% year-on-year, with international traffic up 7.2%. Capacity increased 3.6% to 49.7 billion cargo tonne‑kilometres, a record for January, with all regions expanding capacity except North America. The seasonal Lunar New Year lull cut mid‑February chargeable weight by about 20%, but February as a whole still posted a 7% increase, driven by a 14% rise in Asia‑Pacific volumes while Europe slipped 3%.

The Middle East conflict has become the key constraint. Operational disruptions at Dubai, Doha and Abu Dhabi have grounded close to half of capacity originating from the Middle East and South Asia, according to WorldACD estimates. Airlines have suspended some regional flights and, more critically for the Transpot Middle East market, have stopped accepting bookings on affected routings. This has pushed Asia–Europe flows to bypass traditional Gulf hubs, with direct capacity between China/Hong Kong and Europe up 26% and volumes via alternative non‑Gulf corridors up 14%.

At sea, reduced traffic and heightened risk around the Strait of Hormuz are limiting tanker and container movements, reinforcing modal shift risks as shippers evaluate sea‑to‑air conversions to avoid delays and insurance surcharges. For Middle East‑linked supply chains, this interplay between maritime disruption and air capacity shortage is tightening effective supply far more than global headline capacity numbers suggest.

📊 Fundamentals & Policy Backdrop

On the cost side, the year began with comparatively benign jet fuel economics, but the conflict‑driven oil spike has rapidly lifted jet fuel benchmarks and crack spreads. International agencies now highlight sharply higher jet fuel price expectations for 2026 as the Iran war and attacks on energy infrastructure constrain exports and raise risk premia. For airlines exposed to Middle East routings—with limited hedging or longer diversions—unit costs are rising just as capacity is being curtailed.

Trade policy is adding structural friction. The partial invalidation of some 2025 US tariffs alongside new duties under Section 122 of the Trade Act of 1974 is prompting adjustments in sourcing and routing, with some Asia‑origin cargo re‑optimised toward Europe and other regions rather than the US. Parallel regulatory changes in e‑commerce—most notably the removal of US duty‑free thresholds and impending EU reforms—are reshaping small‑parcel flows, lengthening customs processes and potentially favouring consolidated air freight solutions over fragmented postal‑type shipments.

Demand drivers remain resilient: e‑commerce continues to underpin higher‑frequency, time‑sensitive air cargo, and the broader macro impact of higher oil prices has not yet translated into a pronounced downturn in airfreight‑relevant sectors. However, if elevated energy costs persist and maritime bottlenecks around Hormuz deepen, the cost of transport for many consumer goods and components will rise further, increasing the risk of demand destruction later in 2026.

📆 Near-Term Outlook & Strategic Takeaways

In the coming weeks, the Transpot Middle East market is likely to remain characterized by constrained capacity, re‑routed Asia–Europe flows and firm to rising rates. The post–Lunar New Year rebound in volumes, combined with continued uncertainty around the security of Gulf airspace and shipping lanes, should sustain carriers’ pricing power. Any further escalation around key oil and gas infrastructure would amplify fuel cost and insurance pressures, reinforcing the floor under rates even if demand growth moderates.

🧭 Trading & Sourcing Recommendations

• Advance bookings: Shippers with exposure to Asia–Europe or Asia–Middle East lanes should secure uplift well ahead of need, prioritising block‑space agreements or medium‑term contracts where feasible to cap rate volatility.
• Route diversification: Where transit times allow, explore routings via non‑Gulf hubs and secondary European gateways, even at slightly higher base rates, to lower disruption risk and dependence on constrained Middle East capacity.
• Mode optimisation: For lower‑value or less time‑critical cargo, re‑balance portfolios toward sea or rail, reserving air for high‑margin, time‑sensitive goods; this is especially important as jet‑fuel‑linked surcharges rise.
• Contract clauses: Incorporate explicit fuel and war‑risk surcharge mechanisms in contracts to improve transparency and reduce disputes as costs shift.

📍 3‑Day Directional Outlook (EUR Terms)

• Middle East–Europe air freight: Sideways to slightly higher; constrained Gulf capacity and fuel surcharges support rates, but some relief from alternative routings limits upside.
• Asia–Europe via Middle East: Firm to higher; continuing diversions and booking suspensions keep spot space tight and favour early commitments.
• Asia–Europe direct (non‑Gulf): Slightly higher but more stable than Gulf‑routed options as increased direct capacity absorbs re‑routed volumes.