How the 2026 Iran War Reshaped the Competitive Landscape for Sustainable Aviation Fuel

The U.S.-Iran war that began in late February 2026 has dramatically shifted the competitive landscape for sustainable aviation fuel (SAF) by roughly halving its relative price premium, yet the conflict has also exposed deep structural barriers that prevent SAF from scaling to meet the moment.

Price Gap Compression

Before the war, SAF cost roughly 2.5 to 3 times more than conventional jet fuel — the main barrier to adoption . The war-induced surge in conventional jet fuel prices has compressed that ratio to approximately 2x (and in some estimates to around 1.8–2x) .

Jet fuel prices rose more than 120% from pre-war levels, hitting $1,838 per tonne in early April 2026 before stabilizing above $1,500 . By contrast, Singapore jet fuel jumped 72% to $225.44/barrel within the first week of March 2026 . In absolute terms, conventional jet fuel now trades at roughly $1,100–1,300/tonne, up from a pre-war baseline of $700–900/tonne .

SAF prices have also risen during the crisis — reaching around $3,000/tonne by mid-2026 — in part because the dominant HEFA pathway uses agricultural feedstocks (used cooking oil, animal fats, vegetable oils) that are priced by commodity markets, not crude oil, and which have themselves experienced inflation and supply-chain strain .

Production Volumes Remain Tiny

Global SAF production is projected at only 2.4 million tonnes in 2026, representing about 0.8% of total jet fuel demand . This marks a deceleration in growth: output roughly doubled from 2024 to 2025 (reaching ~1.9 Mt) but is increasing by only ~0.5 Mt from 2025 to 2026 .

IATA has stated that 500 million tonnes of SAF per year will be required by 2050 to achieve the industry's net-zero target — a roughly 200-fold increase from current levels . The sheer scale mismatch — 2.4 Mt of SAF vs. roughly 300 Mt of annual global jet demand — means SAF cannot materially substitute for lost conventional supply in the near term .

Structural Cost Barriers Persist

The dominant SAF pathway (HEFA) is tied to agricultural commodity prices, not crude oil. This means the Strait of Hormuz shock did not and cannot directly close the feedstock-cost gap . Multiple independent analyses conclude that SAF will not reach price parity with fossil jet fuel under any realistic near-term scenario. The premium is structural — rooted in the chemistry and supply chains of renewable feedstocks — not a temporary feature of an immature market .

The crisis has also exposed that the Middle East SAF pipeline is directly exposed to the conflict, and policy frameworks face a simultaneous stress test .

Broader Contested Impact on the Energy Transition

Short-term relative boost for SAF: The war has made SAF "interesting again" by narrowing the price gap and pushing the EU to consider ramping up SAF procurement to replace disrupted Middle Eastern jet fuel supplies . Airlines facing doubled fuel costs and potential shortages — the IEA warned of physical shortages starting June 2026 — are under unprecedented pressure to secure alternatives .

Contradictory pressures on the transition: On one hand, the crisis has accelerated policy interest in SAF and highlighted the strategic vulnerability of relying on fossil jet fuel routed through a single chokepoint . On the other hand, the supply shock has also triggered a record increase in US conventional jet fuel output — the EIA reported US production hit an all-time high in response to price signals — and the scale mismatch means SAF cannot materially substitute for lost conventional supply in the near term .

Policy stress test: EU mandates for SAF blending remain in law, but the crisis has raised questions about affordability, feedstock availability, and whether governments will prioritize fuel security over decarbonization speed if the Strait remains blocked . A preliminary US-Iran deal in June 2026 briefly sent oil prices lower, but analysts predicted it would take months or years for fuel prices to normalize .

Bottom line: The war has compressed SAF's relative-cost disadvantage from ~3x to roughly 2x, creating a genuine window of improved competitiveness. But SAF's absolute production volume (0.8% of demand), its structural feedstock-cost ceiling, and a simultaneous surge in conventional output all mean the conflict has not triggered a material shift toward SAF at scale. The crisis has instead exposed the tension between energy security and decarbonization — making SAF more economically interesting in relative terms while underscoring how far the industry is from replacing fossil kerosene.