July delivered a striking contradiction for the global air cargo market.
As the fragile ceasefire between the US and Iran began to break down and strikes resumed across the Gulf, jet fuel prices climbed steadily through most of the month. Yet airfreight rates continued to decline, showing that higher fuel costs were not enough to reverse the broader market trend.
The latest confrontation followed a ceasefire in June, with the US and Iran trading strikes across the region again. The resulting volatility immediately lifted energy markets.
According to IATA’s Jet Fuel Price Monitor, based on Platts data, jet fuel prices increased for four consecutive weeks through July 24. Even after easing slightly during the week ending July 31, prices remained approximately 76.4% above their level a year earlier.
Airfreight rates, however, followed a very different trajectory.
The global Baltic Air Freight Index (BAI00), calculated by TAC Index, declined for five consecutive weeks through July 27. It fell 8.8% month on month, leaving the index 16.8% above its level a year earlier.
The index recovered slightly during the week ending August 3, but remained 5.0% lower month on month while standing 19.6% higher year on year.
Although that still represents a significant premium over 2025 levels, it remains well below the much stronger increases recorded in March and April.
Fuel is critical, but not the only cost
Jet fuel is one of the largest expenses for airlines, generally accounting for one-third or more of total operating costs. However, movements in fuel prices do not automatically translate into equivalent changes in freight rates.
Airlines must also cover aircraft acquisition or leasing costs, skilled personnel and a range of fixed operating expenses.
That helps explain why July’s fuel surge did not trigger the dramatic freight-rate increases seen earlier in the year.
When the US and Israel first launched air strikes against Iran in February, followed by Iranian attacks on oil and gas infrastructure across the Gulf and the effective closure of the Strait of Hormuz, many carriers were caught off guard.
This time, the industry was better prepared.
Sources indicate that airlines had strengthened their fuel hedging strategies and taken steps to secure supplies further in advance. Carriers may have been paying more for fuel, but they were less concerned about whether sufficient supply would be available.
That preparation appears to have limited the impact on freight pricing.
Summer capacity adds further pressure
Seasonality also played an important role.
July marks the beginning of the traditional summer slowdown for air cargo, when passenger traffic increases but demand for freight can soften. More passenger flights also create additional bellyhold capacity on certain routes, particularly across the Transatlantic market.
At the same time, the end of the EU’s de minimis regime for small parcels entering the bloc from the beginning of July created an additional shock for the Asia-Europe market.
The change contributed to a noticeable decline in Asian volumes moving into Europe.
That weakness was particularly visible in Hong Kong-Europe spot rates. BAI Spot prices dropped from HK$42.53 per kilogram on June 30 to HK$35.08 per kilogram on July 31.
The decline came despite reductions in available capacity on the Asia-Europe corridor, with some freighters undergoing maintenance and others being moved to alternative routes.
The Transpacific market proved considerably more resilient.
Hong Kong-US East Coast rates slipped only slightly, from HK$53.49 per kilogram at the end of June to HK$50.78 at the end of July. Rates to the US West Coast fell from HK$49.43 to HK$46.34 per kilogram.
Strong shipment volumes helped keep the US-bound market comparatively firm.
Hong Kong and Shanghai follow the global trend
The BAI30 index, which tracks outbound rates from Hong Kong across both spot and forward contracts to multiple destinations, fell 9.6% over the four weeks to July 27.
That left the index 16.5% higher year on year. Following a small recovery in the week ending August 3, the year-on-year increase reached 22.0%.
Shanghai showed a similar pattern.
The BAI80 index, covering outbound shipments from the world’s second-largest cargo hub by volume after Hong Kong, fell 8.8% month on month through July 27, leaving it 23.3% above its year-earlier level.
After another modest decline during the week ending August 3, the index stood 20.5% higher year on year.
Rates from Shanghai and major Southeast Asian cargo centres generally softened during July, with further weakness particularly visible on routes to Europe. Transpacific prices remained somewhat stronger.
Semiconductor hubs buck the trend
Not every Asian market followed the broader decline.
Rates from Taiwan and Seoul, two major semiconductor production and export centres, began rising again toward the end of July, particularly on routes to the US.
The development comes as semiconductor-related cargo continues to provide important support for airfreight demand.
European markets also produced mixed results.
Outbound rates from Frankfurt, tracked by the BAI20 index, declined steadily for most of July before rebounding strongly toward the end of the month. By August 3, the index had gained 4.4% over four weeks and returned to positive year-on-year territory at 32.1%.
London Heathrow followed a different path. The BAI40 index benefited for much of July from stronger rates on disrupted Middle East routes, before falling sharply toward month-end. It ended the period 11.6% below its year-earlier level.
In the United States, freight rates generally remained firm throughout July. The BAI50 index for outbound Chicago shipments slipped 3.9% month on month through August 3, but remained 21.0% above its level a year earlier.
AI uncertainty reaches the air cargo market
Beyond freight fundamentals, financial markets were increasingly focused on the sustainability of the global artificial intelligence investment boom.
Investors continued to debate which companies would ultimately emerge as winners, with competitors such as Anthropic and OpenAI facing growing competition from Chinese open-source developers.
The bigger question, however, was the enormous scale of investment required by the AI sector.
Markets have increasingly questioned whether the expected revenue and profit growth can justify the investment levels being directed toward data centres, electricity generation and network infrastructure.
Those concerns contributed to further volatility in equity markets during July.
Several major technology companies experienced sharp declines, including semiconductor manufacturers Samsung and SK Hynix in South Korea, after both companies had recently reached new highs.
It remains too early to determine whether the short-term volatility will develop into a broader technology sell-off or eventually contribute to the bursting of what some investors have described as an AI bubble.
For the air cargo sector, however, semiconductor demand remains resilient.
TAC Freight data showed airfreight rates from Korea and Taiwan recovering again toward the end of July, particularly on US-bound routes.
For now, rates from these semiconductor-heavy markets remain significantly above year-earlier levels and comfortably higher than global averages.
The July data therefore point to a market being pulled in several directions at once: geopolitical tensions are pushing fuel costs higher, seasonal capacity and weaker demand are weighing on freight rates, while semiconductor shipments and resilient US demand continue to provide important pockets of strength.
For airlines, the difference from the February shock is clear. Better fuel planning and hedging have given carriers more room to absorb higher energy costs without immediately passing the full increase on to cargo customers.
