Air cargo contract rates are now forecast to rise 5% to 15% in 2026 instead of falling, as renewed hostilities between Iran and the United States continue to reduce airline capacity through the Middle East corridor, according to freight analytics firm Xeneta. The revised outlook directly contradicts Xeneta's initial forecast at the start of the year, which called for contract rates to decline 5% to 10% in 2026.
The Iran war, which began on Feb. 28, immediately forced more than 12% of global air cargo capacity — both passenger belly holds and freighter aircraft — out of service because of airspace and airport closures, flight cancellations, and longer rerouting to avoid war risk. Initial capacity reductions were close to 20%, according to consultancy Rotate. Over the same period, air cargo demand grew 4%, ahead of the original 2% to 3% growth forecast for the full year, Xeneta said, driven by global economic resilience and disruption to ocean shipping services on Middle East lanes.
Rate Movements and Capacity Tightening
The combination of higher demand and shrinking supply pushed combined spot and long-term contract rates up 17% in the first half of 2026 compared to the same period last year. Rates for immediate delivery jumped 22% and long-term rates rose 11%. Airline spot rates soared 40% in the May-through-June period, Xeneta reported.
| Metric | Change | Period |
|---|---|---|
| Combined spot + contract rates | +17% YoY | H1 2026 |
| Spot rates (immediate delivery) | +22% YoY | H1 2026 |
| Long-term contract rates | +11% YoY | H1 2026 |
| Airline spot rates | +40% | May–June 2026 |
| Global air cargo demand | +7% YoY | June 2026 |
| Global supply growth | +3% YoY | June 2026 |
| Aircraft utilization | 62% (up 3 points) | June 2026 |
Xeneta data shows spot rates have plateaued but have not fallen. The Freightos index indicates air cargo rates are 25% higher than before the war began.
Strong demand for semiconductors and AI-related hardware pushed air cargo demand to 7% year-over-year growth in June. AI technology now represents about 10% of total air cargo volume, according to Xeneta. Global semiconductor sales more than doubled year over year in April. AI-related goods movement is heavily concentrated in the trans-Pacific corridor.
Carrier Network Changes
The reduction in capacity and ongoing volatility was underscored on Friday when Cathay Pacific announced it has postponed the resumption of its passenger and freighter services to Dubai and Riyadh, Saudi Arabia. Cathay Cargo said freighter service to Riyadh, scheduled to resume on Aug. 1, has been postponed indefinitely, while passenger services scheduled to restart Sept. 1 have been pushed back until late October.
A new source of capacity this year is AerCap, which is leasing the all-new Boeing 777-300 converted freighter from Israel Aerospace Industries to carriers.
Balancing AI Growth and E-Commerce Decline
While AI-related shipments are boosting demand, the e-commerce segment — the air cargo sector's main growth engine for the past three years — has stalled after new rules ending duty-free access for low-value parcels in the United States and the European Union took effect. The U.S. removed the de minimis exemption last year and began applying regular duty rates to all goods. The European Union removed the duty-free threshold on July 1 and replaced it with a 3 euro fee per product line item, with a 2 euro handling fee expected to be mandated in November. China's low-value e-commerce exports fell 7% year over year in May, the sixth consecutive monthly decline, Xeneta reported.
Implications for Shippers and Operators
Freight forwarders and shippers should prepare for higher air cargo costs through the remainder of 2026, with limited capacity on key Middle East lanes and the trans-Pacific corridor. The combination of sustained demand, reduced supply, and geopolitical uncertainty suggests that rate relief is unlikely in the near term. Operators should consider securing long-term contracts now to lock in capacity before further increases, and monitor developments in the Iran conflict for potential airspace reopenings or additional disruptions.
Watch List
- Iran-U.S. geopolitics: Any ceasefire or escalation will directly affect capacity through the Middle East.
- AI hardware demand: Continued growth in semiconductor and AI-related shipments will sustain pressure on air cargo capacity, particularly on trans-Pacific lanes.
- E-commerce policy changes: The EU's handling fee deadline in November and any further U.S. customs adjustments could alter demand patterns.
- AerCap's 777-300 freighter deliveries: New capacity from converted freighters may partially offset the shortfall.
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