Key Takeaways:
- Europe may have only about six weeks of jet fuel remaining due to the Strait of Hormuz blockade amid the Middle East crisis, according to IEA Executive Director Fatih Birol.
- Birol warned this could become "the largest energy crisis we have ever faced," with broad economic impacts including higher fuel, gas, and electricity prices, and potential energy rationing, particularly in emerging economies.
- Air travel is vital to Europe’s economy, contributing nearly €851 billion to GDP and supporting 14 million jobs, according to ACI Europe.
- EasyJet reported a 2% year-on-year decline in later-year bookings and £25 million in extra March fuel costs, though it has hedged 70% of its summer fuel to manage volatility.
- ACI Europe warned that peak summer travel could be disrupted, leading to "harsh economic impacts" for tourism-dependent EU member states.
The International Energy Agency’s head warned Thursday that Europe maybe has six weeks left of jet fuel as the airline industry continues to grapple with headwinds due to the Middle East crisis. IEA Executive Director Fatih Birol said the Strait of Hormuz blockade will result in "the largest energy crisis we have ever faced," in an interview with The Associated Press on Thursday. "In the past there was a group called ‘Dire Straits.’ It’s a dire strait now, and it is going to have major implications for the global economy. And the longer it goes, the worse it will be for the economic growth and inflation around the world," he said. He added that the broader economic impact includes "higher petrol (gasoline) prices, higher gas prices, high electricity prices," with some parts of the world "hit worse than the others." Birol previously warned that the energy crisis was set to hit harder in April as oil supply constraints worsen. "In April, there is nothing," Birol said last month. "The loss of oil in April will be twice the loss of oil in March. On top of that you have LNG and others. It will come through to inflation, I think it will cut economic growth in many countries, especially emerging economies. In many countries the rationing of energy may be coming soon."
Analysts echoed similar warnings to CNBC earlier this week, with Claudio Galimberti, chief economist at Rystad Energy, telling CNBC’s Ritika Gupta on "Europe Early Edition," on Tuesday that the situation facing airlines "pretty much depends on how many barrels will be flowing through the strait." Rico Luman, senior economist at ING, told CNBC’s "Squawk Box Europe" on Tuesday: "We’ve seen these vessels now stopping, so supplies from the Middle East have run out, and we need replacements." Air travel generates 851 billion euros (nearly $1 trillion) in gross domestic product for European economies each year and supports 14 million jobs, ACI Europe said. European airline EasyJet said Thursday that the Middle East conflict and rising fuel costs are weighing on customer bookings, with those buying tickets for later in the year down 2% compared with 2025. Meanwhile, the budget carrier said it took on roughly £25 million ($34 million) in additional fuel costs in March alone, and hedged at least 70% of its summer fuel to protect against volatility. ACI Europe, which represents airports across the European Union, said last week that peak summer travel will be disrupted, with "harsh economic impacts" for several member states that rely on the economic boost. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.