Ryanair Sees Profits Slump as Middle East Conflict Drives Up Fuel Costs and Dents Travel Demand

Ryanair’s pre-tax profits took a 34% nosedive in the spring quarter, landing at €593 million, as the escalating conflict between the US and Iran sent jet fuel prices soaring and made travelers think twice about booking flights. The Irish low-cost carrier reported flat sales for the three months through June, forcing it to slash fares just to keep planes full.

The airline now expects summer ticket prices to come in slightly below last year’s levels, pointing to what it calls “consumer hesitancy” around air travel. Fuel costs have jumped sharply since February, when US and Israeli strikes against Iran began. While Ryanair has locked in prices for most of its future fuel needs through hedging, the cost of unhedged fuel has more than doubled.

Over the weekend, crude oil climbed past $90 a barrel for the first time in a month after heavy exchanges of fire between the US and Iran. Traffic through the Strait of Hormuz—a critical chokepoint for global oil and gas—has essentially stopped. Brent crude rose 2.5% on Monday. Ryanair warned that its full-year results remain “highly sensitive” to further escalation in the Middle East and Ukraine, as well as to unhedged fuel prices.

Shane Oliver, head of investment strategy at fund manager AMP, cautioned that if the strait stays closed and the war intensifies, oil could hit $150 a barrel to balance supply and demand. “This is not our base case,” he said, “but it’s a high risk again.”