Jet fuel prices have declined significantly in recent weeks as crude oil exports through the Strait of Hormuz resume and global supply conditions improve. Increased refinery production and strong import volumes into Europe have eased concerns regarding fuel availability, resulting in a more favourable cost environment for airlines. Market sentiment has shifted from supply concerns to expectations of adequate fuel availability through the peak summer travel season, with much of the geopolitical risk premium now removed from pricing. Similar downward trends have been observed in Asia and North America as regional fuel markets stabilize. While jet fuel prices remain above pre-conflict levels and some supply chain risks persist, particularly around the gradual normalization of traffic through the Strait of Hormuz, the overall outlook is positive. Lower fuel prices are expected to provide cost relief to airlines and support operating margins over the near term.

French chemicals engineer Technip Energies has agreed with Airbus, Safran and Tereos to form a joint venture to develop a 160,000 tonne/year sustainable aviation fuel (SAF) plant at Dunkirk in northern France. The proposed development represents a positive long-term development for the aviation sector's energy transition and fuel supply diversification. The project will utilize alcohol-to-jet technology to convert ethanol derived from agricultural and forestry residues into SAF suitable for use in existing aircraft and engines. While the project remains subject to final investment approval and is not expected to provide near-term supply benefits successful implementation would contribute to airlines' sustainability objectives and may help mitigate future regulatory and environmental compliance risks associated with carbon emissions.

Middle Eastern airline capacity remains significantly below pre-conflict levels, with weekly departing seats down 24% year-on-year, reflecting the ongoing impact of the Iran conflict on regional air travel. While some airlines, such as Etihad and Royal Jordanian, have increased capacity in an effort to capture market share, major carriers including Saudia, Emirates and Qatar Airways continue to operate reduced schedules, and several international airlines have yet to resume services to the region. Although capacity is expected to gradually recover through the third quarter, industry experts caution that passenger demand may take much longer to return as travel patterns and customer behaviour have already shifted. However, IATA believes the disruption is temporary and that Gulf carriers will ultimately regain their position as key global transit hubs between Europe and Asia, with no permanent structural change to the region's airline business model.