The latest oil price rebound is extending the cost squeeze across transport, with airlines, road operators and the travel trade facing difficult decisions on fares, contracts and capacity.

Oil rebound puts transport costs back in focus

Oil's latest rebound is putting transport operators back under pressure just as the industry was beginning to adjust to the first wave of the Middle East energy shock.

Reuters reported on September 27 that oil prices rose after US President Donald Trump rejected an Iranian peace proposal, reinforcing concerns that disruption to regional energy supplies could continue. For airlines, road transport companies and logistics operators, the concern is less about one day's movement in crude and more about how long elevated fuel costs remain embedded in operating budgets.

Airlines face the sharpest exposure

Airlines are carrying the most immediate exposure.

The International Air Transport Association (IATA) has already cut its 2026 profitability outlook sharply, forecasting global net profits of US$23 billion, down from US$45 billion in 2025. IATA expects airline fuel expenditure to reach US$350 billion this year, almost 40% above 2025, with fuel accounting for 31.4% of airline operating costs. Its figures are based on an assumed average jet-fuel price of US$152 a barrel. IATA's June outlook also shows airlines attempting to recover some of the increase through higher passenger yields and ancillary revenue.

That creates a difficult equation for carriers. Demand has not disappeared, but airlines cannot indefinitely absorb higher fuel bills without affecting fares, schedules or margins. The result could be a more selective approach to capacity, particularly on thinner routes where higher operating costs are harder to recover.

Road operators feel the diesel squeeze

Road transport faces a different problem: diesel.

Reuters reported on September 21 that a global diesel shortage linked to the wars in Iran and Ukraine could persist into 2027. Supplies have been disrupted, inventories have fallen sharply and prices have reached record levels in several markets.

For trucking and logistics companies, that can translate directly into higher freight rates. Tourist coaches, airport transfers, taxis and intercity buses are exposed in much the same way. Operators can renegotiate contracts or introduce fuel surcharges, but doing so is more difficult where travel companies have already sold packages at fixed prices.

DMCs and tour operators face margin pressure

That puts DMCs and tour operators in a particularly exposed position. A coach-heavy itinerary that looked commercially viable several months ago can carry a different margin once fuel costs rise substantially.

Suppliers may increasingly seek shorter contract periods, fuel-adjustment clauses or greater flexibility to substitute rail for road on suitable routes.

For travel companies, this is becoming a contracting issue as much as a transport issue. Ground-handling costs can be difficult to pass on once a package has already been priced and sold.

Rail gets some protection from electrification

Rail has one significant advantage, particularly in markets with highly electrified networks.

Almost 99.6% of India's broad-gauge railway network was electrified by March 2026, according to the Ministry of Railways. Diesel consumption for railway traction fell from 293 crore litres in 2015-16 to 108 crore litres in 2024-25. That does not make rail immune to energy-market volatility, but it reduces its direct exposure to diesel prices. For the travel trade, it strengthens the case for rail where routes, schedules and passenger demand make substitution practical.

Fuel risk moves into travel planning

The commercial implications are already moving beyond transport budgets. Airlines may need to revisit capacity and pricing assumptions; coach operators face renewed pressure on margins; and tour companies have to account for fuel volatility when contracting ground services.

The next variable will be duration. If Middle East supply constraints persist and diesel markets remain tight into 2027, transport companies will have to treat fuel risk as a planning issue rather than a temporary surcharge.

For travel businesses, that could mean more flexible contracting, greater use of electrified rail and closer scrutiny of the transport component in package pricing. The oil market may be set in motion thousands of kilometres away, but its impact is increasingly being felt in the margins of the travel trade.