Air cargo rates set to ease after US Iran ceasefire but recovery delayed

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 still 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, creating a supply shortage and pushing rates sharply higher. The impact was most visible 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 and the moment airlines begin increasing flights through Middle East airspace it will put less pressure on existing capacity and create downward pressure on rates.

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

Xeneta data for the week ending 5 April shows how sharply rates have increased across key trade lanes. Air cargo spot rates rose by 105% on the South Asia to Europe corridor. Rates were also up by 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.

Falling jet fuel prices are expected to add some downward pressure, but 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 infrastructure again takes time, customers need to find and trust services again, and insurance companies may still advise against using Middle East hubs despite the ceasefire.

Van de Wouw also said carriers will be in no rush to lower rates given the ceasefire is only temporary and the geopolitical situation remains uncertain.

He added that shippers will also not rush into major routing decisions on the basis of a fragile two week ceasefire, noting that the timeline is too short to justify restructuring freight plans and that he does not expect spot rates to go down as fast as they went up.

He further pointed out that Iran’s re closure of the Hormuz Strait shortly after the agreement adds to the uncertainty, reinforcing cautious behaviour across the market.

Overall, while the ceasefire is likely to ease immediate pressure on air cargo rates, constrained capacity and cautious decision making are expected to delay a full recovery in the market.