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Cruise lines are facing increasing headwinds oil prices are pushing their fuel costs up amid the war with Iran, as analysts warn Carnival could see the biggest hit to its profits in 2026.
The oil price has risen by more than 35% since the oil price war with Iran began amid attacks on oil and transportation facilities and threats to oil tankers and other ships transiting the Strait of Hormuz.
Prices for West Texas Intermediate crude oil have risen above $90 per barrel in recent days, while Brent crude has been just above $100 per barrel during that period. Those prices were between $60 and $70 per barrel a month ago, before the conflict began.
Cruise lines rely on heavy fuel oil and marine gas and typically try to hedge against oil price volatility through financial contracts, although Carnival Corp. constitutes an exception to that practice.
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Cruise lines are facing higher fuel costs due to the war in Iran, which is causing a rise in oil prices. (Joe Raedle/Getty Images)
A change of 10% fuel costs per ton would reduce Carnival’s net revenue by $156 million in 2026, compared with $57 million for its rival Royal Caribbean, according to the latest company filings.
Norwegian Cruise Line said it did not update fuel hedges from its early March earnings report, when it said the 10% change would reduce full-year earnings per share by 7 cents. That would correspond to a decline in net income of about $90 million, according to calculations by Morningstar Research.
The global economy experienced an energy price shock in 2022 Russia invaded Ukraine. That year, Carnival’s fuel costs were 17.7% of total revenue, compared to 12.1% for Royal Caribbean and 14.2% for Norwegian.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CCL | CARNIVAL CORP. | 24.71 | +0.72 |
+3.02% |
| RCL | ROYAL CARIBBEAN GROUP | 280.81 | +8.21 |
+3.01% |
| NCLH | NORWEGIAN CRUISE LINE HOLDINGS LTD. | 19.84 | +0.96 |
+5.08% |
CFRA analyst Alex Fasciano noted that Carnival “owns a larger fleet, meaning consumption levels are also higher than their counterparts.”
Carnival told Reuters in a statement that the “best way to hedge against fuel costs is to use less, so we are focusing on using less fuel first and foremost.”
“We have reduced our fuel consumption by 18% since 2011, despite increasing capacity by almost 38% in that time,” Carnival added, noting that it sees no long-term net benefit from hedging.
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Carnival is not capping fuel prices and is instead focusing on limiting consumption. (Gerard Bottino/SOPA Images/LightRocket via Getty Images)
Cruise lines are facing oil price volatility during the industry’s busiest booking period, known as ‘golf season’, which runs between January and March and with operators typically offering special offers and discounts on travel this year.
These cruises typically occur in the third quarter and contribute disproportionately to cruise operators’ revenues, said Lizzie Dove, an analyst at Goldman Sachs.
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Dove noted that the oil shock could impact Americans’ bookings to Europe, especially for more expensive destinations transatlantic travel.
Reuters contributed to this report.
