Airline ticket prices may stay high as carriers bank on fuel relief from the Iran deal

Airlines set to rebuild margins rather than pass savings to passengers as tight capacity limits competition

FILE PHOTO: People check the flight tracker screens at the Dallas Fort Worth International Airport in Fort Worth, Texas, US, Jan 23, 2026. REUTERS/Alyssa Pointer/File Photo

Airlines stand to save billions of dollars on jet fuel after an interim US-Iran peace deal sent oil prices lower, but passengers are unlikely to see immediate relief as tight capacity allows carriers to keep fares well above pre-war levels.

Lower fuel costs are giving US airlines room to rebuild margins rather than reduce fares, as ticket price increases have already fallen behind this year's fuel cost rises and domestic seat capacity remains constrained.

US jet fuel spot prices stood at $2.85 a gallon on Jun 17, down sharply from an April high of $4.88.

A decline of that size would cut the US airline industry's annual fuel bill by more than $40 billion if sustained.

Outside the US, fare relief is likely uneven. Europe may see long-haul fares ease whilst short-haul fares stay firm.

In Asia, China's airlines face weak pricing power, whilst Hong Kong's Cathay Pacific is better placed.

The Middle East remains an exception, with United Arab Emirates carriers potentially aggressive.

Limited aircraft deliveries and weak low-cost carriers are limiting the risk of a broad domestic fare war.

For passengers, fare relief may depend less on fuel prices than on demand holding up.