Global oil price volatility impacts energy markets and aviation expansion

Global oil markets are facing significant volatility and potential shortages due to ongoing conflict in the Middle East. Following the start of conflict in Iran in February 2026, oil prices rose from US$65 a barrel to over $100 a barrel by mid-September. Traffic through the Strait of Hormuz has dropped to below 15% of prewar levels.

Supply constraints have been exacerbated by attacks on Saudi Arabia’s East-West pipeline, which connects the Persian Gulf to the Red Sea. While the pipeline has restarted, it is operating at low volumes and may take several weeks to reach full capacity. These disruptions, combined with threats to Red Sea exports and refinery damage in Russia, are increasing inflationary pressures.

In the aviation sector, Alaska Air Group is proceeding with ambitious international expansion despite these rising costs. The company, which includes Alaska Airlines, Hawaiian Airlines, and Horizon Air, is adding Boeing 787 Dreamliners to build a long-haul network from Seattle. Chief Operating Officer Jason Berry noted that while high fuel prices and West Coast regional cost disadvantages present challenges, the company is seeking long-term resiliency through alternative options like sustainable aviation fuel.