Middle East airlines are expected to post a collective loss of $4.3 billion in 2026 as the impact of the US-Israel-Iran war continues to disrupt air travel across the region, according to the International Air Transport Association (IATA).

In its latest financial outlook released at the IATA annual general meeting in Rio de Janeiro, the industry body said Middle Eastern carriers are forecast to be the only regional airline market to fall into a loss next year.

Passenger demand in the region is expected to decline by 11.4%, while airline capacity is projected to drop by 4.4%. Net profit margins are forecast to fall to minus 6.1%, compared with a positive 9.4% in 2025.

IATA said airlines in the Gulf are facing operational uncertainty due to airspace restrictions, flight disruptions, rerouting, reduced transfer traffic and higher operating costs linked to the conflict.

The association noted that major Gulf carriers rely heavily on transit passengers travelling between Asia, Europe and Africa, and the loss of connecting traffic is weighing on profitability.

Globally, airline industry profits are expected to fall to $23 billion in 2026 from $45 billion in 2025.

Net profit margins are forecast to shrink from 4.2% to 2.0%.

Jet fuel prices remain a major challenge for the sector.

IATA expects average jet fuel prices to reach $152 per barrel in 2026, up sharply from an average of $90 per barrel in 2025.

Global airline fuel costs are forecast to rise from $252 billion to $350 billion, accounting for more than 31% of operating expenses.

Despite rising costs, global airline revenues are expected to increase 9.4% to $1.165 trillion in 2026, supported by higher fares, strong travel demand and growing ancillary revenues.

IATA also highlighted ongoing aerospace supply chain issues, with aircraft order backlogs exceeding 18,000 jets and the average age of the global fleet reaching a record 15.2 years.