Sky-High Costs: Middle East Crisis Grounds Australian Air Freight

The escalation of conflict in the Middle East on 28 February has rapidly disrupted global air freight, with significant consequences for Australian trade.

Key transit hubs Dubai, Doha and Abu Dhabi sit at the centre of global cargo flows, linking Asia with Europe and beyond. When operations across these hubs were curtailed, capacity dropped sharply. Freight moving between Asia and Europe via the Middle East has fallen by around 40 percent, with more than 20,000 flights cancelled. Major carriers including Emirates, Qatar Airways and Etihad which collectively handle a substantial share of global air cargo have been operating well below normal levels.

While air freight accounts for less than one percent of Australia’s trade by volume, it represents roughly one-fifth by value. High-value and time-sensitive goods including pharmaceuticals, Foreign Banknotes, gold, electronics and perishables are therefore disproportionately affected. Costs have surged. Air freight rates to Europe have risen more than 35 percent since early March, driven largely by fuel prices, which have nearly doubled. Airlines have responded with higher fuel surcharges, war risk fees and increasingly short pricing windows, in some cases valid for just 24 hours.

Efforts to reroute cargo through Asia and Europe have provided limited relief. Airlines are redirecting capacity to alternative hubs, but space is tightening quickly as demand rises. At the same time, disruption to ocean freight is pushing more cargo into air networks, compounding the pressure.

The effects are also being felt domestically. Fuel price increases have driven sharp rises in road transport costs across Australian cities, while exporters particularly in agriculture are facing both higher freight costs and increased risk to product quality due to longer transit times.

Despite a temporary ceasefire announced in early April, uncertainty remains. Even if conditions stabilise, industry analysts expect months of disruption as airlines rebuild schedules, reposition aircraft and clear backlogs.

For Australian businesses, the implications are clear: this is not a short-term shock. Air freight capacity is constrained, costs are structurally higher, and forward planning including early booking and closer engagement with logistics providers is now essential.