Aviation industry hits turbulence amid US-Iran war

Gulf states' central global location has made it the perfect transit hub for global travel, but with flights cancelled due to war, the industry is scrambling to fill the void

Eduardo Ramon

Aviation industry hits turbulence amid US-Iran war

Abdel-Rahman Ayas

last update on 05 Mar 2026

The effects of the war unfolding between the United States, Israel, and Iran have found their way to the global aviation industry. Within hours of the first bombs, airspace closed, key Arab Gulf airports suspended operations, flights were cancelled, passengers were stranded, airline share prices fell sharply, and jet fuel prices surged, with markets anticipating supply problems. Once seamless corridors between cities, the skies closed down.

The effects have been profound. Aviation is not a localised industry; it is a finely balanced network linking craft, crews, airports, transit corridors, and air traffic control centres. When one flight is cancelled, disruption spreads rapidly across the entire system. Each airspace closure or flight suspension requires global operational schedules to be revised within minutes. The US-Israeli war against Iran that began in late February is a stark illustration of that fragile interdependence.

Global transit hubs

Over the past two decades, Gulf airports in Riyadh, Jeddah, Abu Dhabi, Dubai, and Doha have become global transit hubs linking Asia, Europe, and the Americas. Gulf airlines rely on a strategic geographical location that enables long-haul services to be consolidated through major hubs, supported by modern fleets and advanced infrastructure. Yet this model assumes the skies remain open and predictable.

As the US, Israel, and Iran began trading missiles, airspace closed not just over Iran but over Iraq, Syria, Qatar, Bahrain, and Kuwait, while wide-ranging restrictions were imposed over Saudi Arabia, the United Arab Emirates, Jordan, and Israel. Far more than the closure of a runway or two, this was the suspension of entire transit corridors—arterial connections between East and West.

Qatar Airways temporarily suspended operations due to the closure of Qatari airspace. Emirates limited flights to repatriate stranded passengers, while most of its scheduled commercial services were unavailable.

REUTERS/Kim Hong-Ji — An Emirates Airbus A380 aircraft that has remained parked at the airport after the flight was cancelled, amid the U.S.-Israel conflict with Iran, at Incheon International Airport in Incheon, South Korea, on 5 March 2026.

Etihad Airways halted flights to and from Abu Dhabi in line with security updates. The limited resumption of flights days later did not mean the restoration of these Gulf air hubs, which require both an open airport and a network of safe, stable air corridors for thousands of flights to be scheduled daily with a high degree of certainty regarding arrival and departure times.

The true scale of the shock becomes clear from the wave of global cancellations. Major European, American, and Asian airlines swiftly suspended or modified their operations in the Middle East. Lufthansa halted flights to Tel Aviv, Beirut, Amman, Dammam, Erbil, and Tehran, and suspended Dubai routes. British Airways cancelled services to Oman, Abu Dhabi, Bahrain, Dubai, Doha, and Tel Aviv. Air France-KLM suspended Tel Aviv, Beirut, Dubai, and Riyadh services.

In North America, Air Canada suspended flights to Dubai and Tel Aviv until late March, while Delta Air Lines halted its New York-Tel Aviv route. In Asia, Cathay Pacific cancelled its Dubai and Riyadh services, Japan Airlines suspended its Doha flights, and Singapore Airlines halted its Dubai operations. Indian carriers such as Air India and IndiGo stopped using Middle Eastern airspace. Even Turkish Airlines cancelled flights to the Gulf and Middle East, reflecting the breadth of concern.

Reuters — A screen displays cancelled flights to Gulf countries at New Delhi Airport, 3 March 2026.

Financial turbulence

With more than 20 international carriers affected, the list underscores that the war has disrupted cargo and transcontinental passenger flows. As ever, financial markets were quick to register the shock. Airline and travel stocks fell sharply, wiping tens of billions of dollars from their market capitalisation.

European and Asian carriers recorded steep early trading losses, signalling investor anxiety over the potential duration of the crisis. The most sensitive variable has been oil. Brent crude rose by 8%, approaching $84 per barrel, increasing jet fuel costs considerably. Even those airlines that employ partial hedging strategies cannot fully shield themselves from sudden price spikes of this magnitude. Higher fuel costs translate either into thinner margins, higher ticket prices, or both.

Aviation crises quickly disrupt supply chains, which raises commodity prices

The timing is poor, given that the sector had yet to fully recover from the COVID-19 pandemic. Despite being less visible, air cargo is among the most severely affected segments. More than 12% of global air freight by volume passes through the Middle East. An $8tn industry, it accounts for around one-third of world trade by value, but fewer flights (18,000 cancelled at the time of writing) mean reduced cargo capacity.

In a tariff-hit sector that is dependent on speed and precision to deliver everything from pharmaceuticals to semiconductors, any disruption simply multiplies losses, particularly for perishable or high-value goods. Industry reports indicate increasing cargo backlogs at regional airports and the rerouting of shipments via longer, more expensive corridors, as warehouse capacity comes under strain.

As fuel costs climb, so too does the cost of alternative freight solutions. This shows how an aviation crisis soon adds pressure to supply chains and commodity prices. In times of conflict, risk is rapidly repriced, as aviation 'war risk' policies see higher premiums or coverage reassessments. Many travel insurance policies exclude losses arising from armed conflict, meaning cancellation costs may not be recoverable. Rising insurance premiums feed directly into operating costs, while airlines shoulder part of the operational disruption themselves.

REUTERS/Isabel Infan — A departure board displaying cancelled flights in front of an empty Qatar Airways check in area amid the U.S.-Israel conflict with Iran, at Heathrow Airport Terminal 4, in Greater London, Britain, on 2 March 2026.

Industry shocks

Civil aviation has weathered shocks before, but each carries distinct characteristics. During the First Gulf War in 1991, oil prices rose, and vast airspace was closed, yet recovery followed once stability returned. The crisis was fundamentally one of energy and regional geography. After the attacks of 11 September 2001, US airspace was completely shut for days. It led to bankruptcies and deep restructuring, but global aviation geography did not fundamentally change; what changed were its security regimes and risk management.

The war in Ukraine in 2022 introduced another dimension: the near-permanent closure of vast airspace over Russia and Ukraine. European carriers were forced to reroute flights to Asia via longer, more expensive paths, widening cost differentials between airlines. It demonstrated how geopolitics can reshape competitive dynamics. The US-Israeli war against Iran combines this unholy trinity of rising oil prices, a security shock, and the potential redrawing of global air corridors.

There are several possible scenarios. The first is that the war produces a short-lived shock, followed by gradual recovery. If airspace reopens within days and oil prices stabilise, the industry may absorb the disruption (as it has before), with losses confined to a limited timeframe and gradual compensation during the summer season. The second scenario is medium-term disruption of up to a month with sustained restrictions, temporary route restructuring, higher ticket prices, weakened tourism demand in the Gulf and Eastern Mediterranean, and rising insurance premiums.

If war continues, alternative airports in southern Europe, Türkiye, or North Africa could replace Gulf hubs

If war continues, then a reconfiguration of global air routes will be needed. Alternative airports in southern Europe, Türkiye, or North Africa may gain prominence at the expense of Gulf hubs. Investment in longer-range fleets capable of avoiding conflict zones may accelerate, fuel and insurance hedging strategies could be reassessed, and investors may demand a permanent geopolitical risk premium when valuing regional airlines.

In summary, the US-Israeli war against Iran has not just hit a runway or airline; it has challenged the very notion that the skies are a neutral, reliable domain. If globalisation rests on the free flow of goods, capital, and people, then aviation remains its clearest symbol. Today, that symbol seems fragile. Is this a transient disruption or the beginning of a permanent state in which geopolitical risk is factored into aviation economics? The answer will emerge once the smoke clears.

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