Australia's Qantas Airways QAN.AX said on Tuesday it has raised its fuel cost outlook and delayed a planned share buyback, citing sharply higher and volatile jet fuel prices after the war in the Middle East disrupted oil supplies.

The airline said jet fuel prices have more than doubled, lifting its estimated fuel bill for the second half of fiscal 2026 to A$3.1 billion-A$3.3 billion ($2.20 billion-$2.34 billion), up from its prior forecast of A$2.5 billion.

The surge underscores how quickly geopolitical shocks are feeding into airline cost bases, with jet fuel prices soaring as refinery output has been curtailed following the loss of crude supplies from the Middle East.

While Qantas has hedged much of its crude exposure, it remains significantly exposed to the spike in jet fuel spreads, the Australian flag carrier said.

To offset rising costs, Qantas is raising fares and shifting capacity toward stronger routes such as Europe, where demand remains firm, while trimming domestic capacity by about 5 percentage points in the June quarter.

"Qantas continues to see strong demand for international travel to Europe as customers seek alternative routes," the airline said.

"In response, the Group has redeployed capacity from the U.S. and its domestic network to increase flights to Paris and Rome."

Revenue per available seat kilometre (RASK), a key measure of pricing power, is expected to rise 4%-6% for international operations and about 5% domestically in the half year to June, reflecting higher fares, Qantas said.

"Apart from increasing fares and reducing capacity, Qantas may impose a fuel surcharge to help offset the additional costs," said Craig Sidney, senior investment adviser at Shaw and Partners.

"The Australian airline industry will continue to be impacted whilst fuel costs are elevated, particularly unhedged refinery costs."

The scale and speed of the fuel shock have prompted Qantas to take a more cautious capital stance, with management opting to hold off on a previously flagged A$150 million buyback.

Shares of the airline ended marginally lower at A$9.

($1 = A$1.4085)

-Reporting by Roushni Nair and Sneha Kumar in Bengaluru; Editing by Christian Schmollinger, Sonali Paul and Sumana Nandy/Reuters