Jet fuel prices have roughly doubled since the closure of the Strait of Hormuz in late February 2026, triggering route cuts, fare increases, and a broad sell-off in airline stocks globally. Analysts estimate the crisis could cost the U.S. airline sector an additional $25 billion in unbudgeted expenses this year, while United Airlines Chief Executive Scott Kirby has warned the carrier’s annual fuel bill could swell by $11 billion if current prices persist.
Against that backdrop, Frank Holmes, Chief Executive Officer and Chief Investment Officer (CIO) of U.S. Global Investors, argues that the market is overreacting, that U.S. carriers hold structural advantages their international peers do not, and that the shift away from fuel hedging may prove more of an opportunity than a liability. NewsGhana spoke with Holmes in a written interview.
How significant is the recent surge in jet fuel prices for airline profitability in the near term?
The surge in jet fuel prices, up more than 120 percent year-to-date, is a meaningful near-term headwind, especially since fuel can account for a large share of airline operating costs. But it is important to note that this is not unprecedented and does not derail the industry’s broader recovery. As Holmes has written separately, the aviation industry was on track for a record $41 billion in global profits in 2026 before this crisis, and the long-term investment case remains intact.
To what extent does the U.S. domestic energy advantage provide a buffer for airlines compared to global competitors?
U.S. airlines benefit from a significant structural advantage. The U.S. is a leading oil producer with strong domestic supply, reducing reliance on geopolitically sensitive regions like the Middle East. This domestic energy strength helps insulate U.S. carriers from global supply shocks and positions them more favourably than many international competitors during periods of elevated oil prices.
This distinction matters in practice. The U.S. makes abundant jet fuel in refineries in Louisiana and Texas, and while some regional exposure exists, European and Asian carriers are far more directly exposed to the supply disruption caused by the near-closure of the Strait of Hormuz. The top three global exporters of jet fuel, China, South Korea, and Kuwait, have all been knocked out of normal operations simultaneously, creating what one analyst described as a double impact on both finished jet fuel and the crude oil needed to refine it.
Why might the market be mispricing airline stocks in the current environment?
The market may be overestimating the negative impact of higher fuel prices while underappreciating key offsets like strong travel demand, improved airline balance sheets, and pricing power. Investors may also be overlooking the U.S. energy advantage, which helps cushion domestic carriers relative to global peers. As a result, airline stocks could be undervalued compared to their actual resilience and earnings potential in the current environment.
How should investors interpret the decision by many airlines to step back from fuel hedging strategies?
We view the shift away from fuel hedging as a strategic decision, not a negative. While it can increase short-term exposure to price swings, it also avoids locking in fuel at potentially unfavourable levels. U.S. airlines are likely better positioned without heavy hedging because they can benefit more quickly when fuel prices decline, rather than being tied to above-market contracts. For investors, this means there may be more near-term volatility, but also greater flexibility and upside as airlines navigate changing energy markets.
Holmes’s own published analysis notes that European carriers entered this crisis far better hedged, with easyJet having covered 84 percent of its fuel needs for the first half of 2026, while Air France, IAG, and Ryanair also carry solid hedging positions. By contrast, as of the end of 2024, three of the four largest U.S. airlines maintained zero hedging positions. Whether that asymmetry ultimately favours American carriers depends on the direction of oil prices in the months ahead.
