Hormuz Flows Down 30%, Jet Fuel Soars; Airlines Facing Full-Year Losses and Currency Crises

The Iran-Israel conflict has triggered an unprecedented energy supply shock, with crude oil and refined product flows through the Strait of Hormuz down nearly 6 million barrels per day (nearly 30% of total throughput) in the first quarter of 2026, according to the EIA. This seismic disruption is reshaping global energy markets, airline economics, and foreign exchange reserves across Asia. Air New Zealand forecasted a substantial full-year loss as jet fuel costs surge; Qantas is expanding trans-Tasman routes to exploit the airline's weakness; Hunt Oil boss Hunter Hunt called the situation a "nightmare scenario" for Middle Eastern energy infrastructure.

Central banks across the Philippines, India, and other energy-importing nations are burning through foreign exchange reserves at a rapid pace to defend their currencies against the oil-driven inflationThe rate at which prices rise across an economy. shock. Japan's Eneos agreed to purchase Chevron's Asian refining and retail assets for $2.17 billion, signaling confidence in long-term Asian energy demand despite near-term price volatility. Copper prices retreated from record highs as Chinese buyers hesitated ahead of the Trump-Xi summit, but the rally's underlying driver remains clear: industrial demand is resilient even as energy costs rise.

Energy importers and airlines face existential margin pressures. Low-cost carriers, heavily reliant on fuel price stability, are most vulnerable; legacy carriers with hedges or fuel surcharges are less exposed. Defense contractors benefit from elevated geopolitical risk premiums. Japan and South Korea, net energy importers, face currency depreciation if reserve depletion accelerates. Conversely, energy exporters (Saudi Arabia, UAE) and renewable energy companies benefit from elevated oil prices that improve their long-term return on capital.

The risk that invalidates this narrative is a geopolitical de-escalation or a US-led negotiated settlement that restores Hormuz flows swiftly. If flows normalize in weeks rather than months, the energy shock proves transitory and equities re-price higher. Alternatively, if Iran escalates further and closes the Strait entirely, an oil embargo scenario could trigger a demand destruction and recession, compressing all risk assets.