Middle Eastern airlines are expected to post a combined loss of $4.3 billion in 2026, becoming the only region in the global aviation industry forecast to end the year in negative territory, according to the International Air Transport Association (IATA).

The projected downturn is linked to the continuing impact of the US-Israel-Iran conflict, which has disrupted operations across major Gulf aviation hubs and affected passenger traffic throughout the region.

IATA said passenger demand in the Middle East is expected to decline by 11.4 percent this year, while airline capacity is projected to fall by 4.4 percent. Profitability is also set to reverse sharply, with net margins dropping to negative 6.1 percent from a positive 9.4 percent in 2025.

The industry group noted that airspace restrictions, flight cancellations, rerouting of services and reduced transit traffic have significantly increased operating costs for airlines that depend heavily on connecting passengers traveling between Asia, Europe and Africa.

Despite the challenges in the Middle East, global airlines are still expected to remain profitable in 2026, with total net earnings projected at $23 billion. However, this is significantly lower than the earlier forecast of $41 billion, reflecting growing pressures on the aviation sector worldwide.

The report was released during IATA’s annual general meeting in Rio de Janeiro, where the group highlighted the Middle East as the region facing the most severe financial impact from ongoing geopolitical tensions.