Middle East aviation faces turbulent months ahead as war, fuel shocks test airlines

Dubai: The global aviation industry entered 2026 expecting a year of expansion after a turbulent few years following the 2020 Covid pandemic.

Instead, airlines are now heading into a prolonged period of disruption. Experts are saying Middle East carriers are facing the sharpest pressures as geopolitical instability, fuel volatility and airspace constraints redraw the sector’s recovery map.

For passengers and airlines alike, the coming months are expected to bring a more fragile operating environment - not because demand has collapsed, but because the infrastructure that supports global air travel is under strain.

“Aviation as the patient is walking, but the storm just changed the forecast,” said Linus Benjamin Bauer, Founder & Global Managing Partner of BAA and Partners, describing an industry that had largely moved beyond the pandemic recovery phase before fresh conflict disrupted momentum.

“Structurally recovered, geopolitically stress tested. Going into 2026, the industry had effectively declared victory over Covid - on track to carry over 5 billion passengers and generate revenues exceeding $1.05 trillion. Then February 28th happened,” said Bauer.

Over 20,000 flights were grounded, and more than a million people were stranded worldwide. The demand engine is intact. The route architecture is under duress. I'd call this ‘recovery interrupted’,” he explained.

Middle East faces hardest near-term test

Analysts say the Middle East remains one of aviation’s strongest long-term growth markets, but it is now also the most exposed to immediate shocks.

Before the latest regional conflict, Middle East airlines had been forecast to post the world’s highest profitability margins in 2026, with IATA projecting net margins of 9.3 per cent and profit per passenger of $28.60. “Nearly 780 aircraft on order. A $35 billion airport expansion in Dubai,” said Bauer.

That outlook is now under pressure.

“The Middle East aviation sector is entering a defining phase, one where strong financial performance and rapid expansion are matched by a more complex and dynamic risk landscape,” said Abhishek Jain, CEO of EIRS.

He warned that oil price volatility has driven up jet fuel costs, while rerouting around conflict zones is lengthening flight times and raising operational expenses.

“With geopolitical tensions continuing to alter flight routes... war-risk premiums have also risen significantly, adding significant cost per flight hour,” said Jain.

Saj Ahmad, chief analyst at Strategic Aero Research, was more blunt in his assessment of the year ahead.

“Until the conflict with Iran ends permanently, it’s fair to say 2026 will be a bad year. Hike fuel costs, economic pressures derailed flight schedules and cancellations....its a terrible mix of bad fortunes for airlines and passengers alike,” said Ahmad.

Recovery no longer about Covid

The pandemic recovery cycle is effectively over, according to Sergey Glinyanov, senior analyst at Freedom Broker, who says the industry is now in expansion mode - but geopolitical instability has replaced Covid as the central risk.

“In 2026, the aviation industry is operating with traffic levels that have already exceeded pre Covid volumes since 2024... the recovery phase is essentially over and the sector is in an expansion stage.”

What has changed is the nature of disruption.

Bauer said that unlike Covid, which was a collapse in passenger demand, the current crisis is a supply and routing problem.

“Covid was a demand shock - nobody could fly. The Iran war is a supply-and-routing shock - the planes exist, but the airspace doesn't.”

That distinction matters because even when passenger demand remains strong, airlines cannot quickly restore schedules if routes remain blocked or politically unstable.

Expect network reshaping in coming months

Rather than a broad collapse in aviation activity, analysts expect the next several months to bring network reshaping: airlines will redirect aircraft, reduce weaker routes, and prioritise profitable long-haul corridors.

Glinyanov said airlines in the Gulf, including Emirates, Qatar Airways and Etihad, are likely to recover fastest once tensions ease because their hub models are built around transfer traffic.

But until then, disruptions will weigh disproportionately on Gulf carriers.

“Connecting flights play a crucial role for these operators, so any disruption to regional connectivity or airspace access has an outsized impact on their performance,” he said.

Ahmad added that the biggest immediate bottleneck is predictability.

“Airplanes on the ground cost millions. They make money when in the air so airlines need assurance that if the war ends, it doesn't flare up again,” he said.

Aircraft shortages, supply chain strain

Even if geopolitical tensions ease, airlines face another structural challenge: too few aircraft arriving too late.

Bauer said aircraft delivery shortfalls now total at least 5,300 planes globally, with a backlog of 17,000 aircraft.

“This mismatch isn't expected to normalise before 2031-2034.” He added, “The workforce crisis is equally severe - the industry needs 710,000 new maintenance technicians over 20 years, with 80% of the current workforce expected to retire soon.”

That shortage is forcing carriers to keep older, less fuel-efficient aircraft in service, raising costs at a time when jet fuel prices are already climbing.

Glinyanov echoed this concern, saying delayed deliveries of aircraft and engines continue to constrain fleet renewal and expansion.

Profitability will survive, but margins are thinning

Despite the turbulence, analysts do not expect a collapse in airline profitability worldwide. However, margins are becoming thinner and more unevenly distributed.

Bauer said the industry’s earlier expectation of a record $41 billion profit in 2026 is now uncertain.

“I believe the industry will remain profitable, but the record may slip. My metaphor: a diamond under pressure - strong, but not indestructible.”

Ahmad expects US and European carriers to weather the storm better than Gulf airlines.

“Profitability will likely be the domain for US and European carriers while GCC airlines will be hit hard due to the conflict on their doorstep.”

Long-term growth story remains intact

Despite the short-term volatility, the region’s long-term aviation fundamentals remain strong.

Passenger traffic across the Middle East is still projected to reach 530 million by 2043 if stability returns, nearly double current levels, according to EIRS estimates.

Jain said the sector’s future growth will depend less on demand alone and more on resilience planning.

“Demand alone will not drive the next phase of growth in Middle East aviation. This will be anchored on how effectively the industry anticipates, prices, and manages risk in an increasingly uncertain environment,” he explained.

For now, that means the next few months will be less about rapid recovery and more about endurance: airlines staying flexible, protecting margins, and waiting for geopolitical skies to clear.