US Iran ceasefire may ease air cargo rates but recovery lags

The US-Iran ceasefire is expected to bring some immediate relief to air cargo markets, but a full recovery in capacity and freight rates across routes via Middle East hubs could take one to two months, according to Xeneta.

Airspace restrictions across the Gulf following the conflict forced airlines to ground aircraft and cut capacity on key freight corridors. This created a supply shortage and pushed rates sharply higher, particularly on routes linking Southeast Asia to Europe and South Asia to Europe.

Niall van de Wouw, Xeneta’s Chief Airfreight Officer, said: “This has been a supply issue from the start. The moment airlines start increasing flights through Middle East airspace, it will put less pressure on the existing capacity and create a downward pressure on rates.”

He added: “Bringing air capacity back to these corridors should provide welcome relief for shippers, many of whom are facing continuing severe disruption in ocean supply chains which will take far longer to recover from this conflict.”

Xeneta data for the week ending 5 April highlights the sharp rise in rates across major trade lanes. Air cargo spot rates increased by 105% on the South Asia to Europe corridor. Rates were also up 87% from Europe to the Middle East, 84% from South Asia to the Middle East, 82% from South Asia to North America, and 72% from Southeast Asia to Europe.

While falling jet fuel prices are expected to add downward pressure, van de Wouw cautioned that rates will not fall as quickly as they rose and that recovery will take time.

He said, “Even when it is deemed safe to fly, setting up the infrastructure again takes time. Customers need to find you again and trust you again. Insurance companies may still advise against transiting these Middle East hubs despite the ceasefire.”

Van de Wouw also noted that carriers are unlikely to rush to reduce rates given the temporary nature of the ceasefire and continued geopolitical uncertainty. “Carriers will be in no rush to lower rates given the ceasefire is only temporary and the geopolitical situation remains uncertain", he added.

He added that shippers are also expected to remain cautious in their planning, “Shippers will also not rush into major routing decisions on the basis of a fragile two-week ceasefire… a two-week timeline is too short to justify restructuring freight plans - so I do not expect spot rates to go down as fast as they went up.”

Overall, while the ceasefire signals the start of easing pressure in air cargo markets, capacity constraints and cautious market behaviour are expected to keep rates elevated in the near term before gradually stabilising.