By Stuart Condie

SYDNEY--Australia's Qantas Airways said its near-term jet fuel bill would be up to 32% more than previously anticipated, as the Iran conflict hits profitability in global aviation.

The country's largest carrier said demand for flights to Europe remained strong, but flagged a big hit from surging jet refining margins, which is the difference in price between crude oil and refined jet fuel.

Qantas now expects fuel costs for the six months through June to be between 3.10 billion and 3.30 billion Australian dollars, equivalent to between US$2.20 billion and US$2.34 billion.

That compared with the carrier's forecast of A$2.50 billion from less than two months ago.

"Jet fuel prices have more than doubled and remain highly volatile," Qantas said Tuesday.

The Mideast conflict has resulted in significant damage to several large energy facilities, while the U.S. has begun a blockade of the Strait of Hormuz following the collapse of weekend talks in Pakistan with a delegation from Iran. Oil-market investors view the blockade as an escalation of tensions, with the price of Brent crude--the global benchmark--rising 4.4% to nearly US$100 a barrel on Monday.

Analysts expect it will likely take months for oil production in the Middle East to return to pre-conflict levels even if the fragile cease-fire between the U.S., Israel, and Iran holds. They also expect crude-oil prices to be supported by increased shipping costs as insurers charge more for providing protection to tanker movements. That signals an extended burden of higher costs for consumers, including airlines.

Qantas said approximately 90% of its June-half exposure to crude oil was hedged, but that it remained largely exposed to movements in jet refining margins. It said margins had jumped from US$20 per barrel in February to a peak of about US$120 per barrel.

"We are closely monitoring the situation given the ongoing uncertainty in global fuel supply chains," Qantas said. It was currently confident of having sufficient fuel well into next month, it added.

Higher fuel costs and an uncertain local economy are already weighing on domestic demand, prompting Qantas to cut its June-quarter domestic capacity by about 5%. It said it would reschedule or refund affected customers.

However, Qantas has redeployed some domestic capacity to meet strong demand for European travel. It has also rerouted some planes previously servicing the U.S. to increase capacity on routes to Paris and Rome.

Qantas said it now expects June-half international revenue per average seat kilometer--a key industry performance metric--to grow by between 4% and 6%. That's twice the pace it previously expected.

"The group continues to closely monitor the dynamic environment and retains optionality to take further actions to mitigate fuel cost increases over time," Qantas said.

Nonetheless, the airline cited an uncertain outlook as the reason why it had not begun the A$150 million share buyback announced in February. Qantas didn't immediately say whether the buyback, which was due to begin on March 16, had been paused or scrapped.

Buybacks have been cited by analysts as a key driver of Qantas's share price, which hit a series of records over the two years through September 2025. The company bought back more than A$2 billion of stock as it swung back to profitability following a multiyear hit from the Covid-19 pandemic.

Qantas's share price has since cooled but remains about 20% above its pre-pandemic high, giving the company a market capitalization of about A$13.5 billion. The stock was last down 1.0% at A$8.92.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

April 13, 2026 21:18 ET (01:18 GMT)

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