Iran War Drives Air Cargo Rates Up 35-40%, United Posts Record Q2

United Airlines reported a 22.6% increase in cargo revenue to $527 million in Q2 2025, driven primarily by yield (rate) improvements rather than volume growth. The surge stems from significant capacity constraints in the Middle East following geopolitical tensions and military operations between the U.S. and Iran, which began February 28. Spot rates have climbed 35%-40% year-over-year in recent months, with combined average rates up 17% since hostilities began. With global cargo demand growing only 4% in H1 but surging 7% in June alone, constrained supply has created a structural pricing dynamic. United transported 347 million pounds of cargo in Q2, the highest since the 2020 pandemic surge, including 9 million pounds of medical shipments and 232,000 pounds of military equipment.

The geopolitical disruption has created a multi-layered market shock. Airlines have reduced or suspended Middle East operations due to security risks, reducing available belly capacity on both passenger and dedicated cargo aircraft by more than 12%. This supply collapse occurred precisely when demand accelerated, inverting the typical seasonal pattern and justifying rate increases that rival pandemic-era levels. Industry analyst Xeneta now forecasts air cargo rates in 2026 could be 5-15% higher than 2024, suggesting the current elevated-rate environment may persist structurally rather than normalize quickly. For supply chain professionals, this development signals both opportunity and cost risk.

Airlines are prioritizing yield maximization over volume recovery, meaning pricing power will remain with carriers rather than shippers through at least Q3. Shippers dependent on air cargo, particularly pharma, high-tech, and time-sensitive manufacturing, should expect sustained margin pressure and should evaluate alternative sourcing, inventory strategies, or demand postponement. The Middle East route disruption may also accelerate rerouting through alternative gateways (Europe, South Asia), potentially adding transit time and complexity. Organizations should model rate scenarios assuming 10-15% sustained premiums and develop contingency plans for further geopolitical escalation in the region.