February was quiet in air freight – but looking like the calm before the storm

Global air freight rates drifted lower during February – but in what looked increasingly like the calm before the storm that arrived with some intensity from the start of March.

Given large scale flight cancellations across the Middle East and significant disruption to ocean shipping, there looks to be plenty of potential volatility ahead – and likely spikes in rates.

But looking back, the global Baltic Air Freight Index (BAI00) drifted only modestly lower by -4.2% over four weeks to Monday March 2, leaving it slightly below where it was by -1.3% from 12 months earlier..

There were without doubt some serious ongoing geopolitical tensions throughout the month – plus renewed uncertainty about trade patterns after the US Supreme Court ruled Donald Trump’s tariff regime unlawful.

But overall the monthly price trends for February were not far out of line with previous years – with first a modest rise in rates, typical of the so-called ‘mini-peak’  before Chinese New Year; then a quiet spell during the holiday period; then a slow pick-up as factories started to spool up again.

All of this was well reflected in daily BAI Spot rates out of Hong Kong during February – with first a rising trend ahead of the CNY period; then a flattening out in the second week; then a gentle series of falls through the second half of the month.

BAI Spot from Hong Kong to Europe was at $34.60 per kilo on January 30 but had slipped to $31.05 by February 27. Likewise, BAI Spot from HK to the US West Coast drifted down from $35.29 per kilo to $31.09 over the same period. And HK to the West Coast from $33.81 to $30.50.

Meanwhile, the full index of outbound routes from Hong Kong (BAI30) – reflecting the whole spectrum of spot and forward contract business going through – slipped -8.1% over four weeks to March 2, leaving it lower by -6.9% year-on-year.

Outbound Shanghai (BAI80) was a little firmer, dropping -5.7% MoM but leaving it still comfortably ahead by +8.8% YoY.

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Rates out of Europe were also holding up well, with the index of outbound routes from Frankfurt (BAI20) shedding only a modest -0.2% MoM to leave it lower at -7.2% YoY.

And outbound London Heathrow (BAI40) was continuing to look the strongest of the major outbound indices with a gain of +6.0% MoM leaving it ahead by a healthy looking +19.9% YoY.

Rates out of US, however, continued to languish well below the highs of previous years, with the index of outbound routes from Chicago (BAI50) losing another -6.9% MoM to leave it down some -24.7% YoY.

All of that, however, was beginning to look like ancient history within the first few days of March – following the decision of the United States to support Israel in launching massive military strikes on Iran. And then Iran responding with attacks on the US and its allies in the Middle East, notably in the Gulf – resulting in large-scale closures of air space across the region.

Various local carriers such as Emirates, Etihad and Qatar Airways have become important players in global air cargo – causing an immediate impact on capacity, particularly for Asia-Europe cargo, about 50% of which typically goes via the Gulf, but also for wider global supply chains.

The impact was immediately apparent in BAI spot rates not only out of Hong Kong but also out of India – which both started to rise in the first three days of March, with many players already expecting bigger increases to follow.

Given the pace of events, it was of course difficult to predict the overall extent and duration of the impact. But some types of shippers, such as in the garments sector on the Indian subcontinent, were said to be affected immediately – leaving them searching for scarce air freight capacity through alternative routes but at much higher rates.

With Iran making attacks on Gulf oil and gas infrastructure there were also potentially severe implications for jet fuel prices – which had already risen an average of over +10.1% globally over the month to February 27, according to Platts data.

Prior to the renewed conflict in the Middle East – and the renewed spectre of further disruption to trade, together with higher energy prices and higher inflation – from a macro perspective markets had generally begun the year on a positive note. 

Markets were still fretting about the sheer scale of capital expenditure related to the AI theme by big US players like Alphabet, Amazon and Meta – and how realistic are the return on investment (ROI) expectations. But the huge capex spend was of course also bringing benefits to many including US semiconductor manufacturers like Nvidia, Broadcom and AMD.

Since the start of 2026, this boost was also extending to the equity prices of key manufacturers in Asia like TSMC of Taiwan as well as Samsung and SK Hynix of South Korea – also reflected in the continuing strength of air cargo rates out of Taiwan and Seoul.

That said, the South Korean equity market – which had jumped about +50% in the first two months of the year – was also the most immediately hard-hit by events in the Middle East, giving back -20% in just the first three trading days of March, led lower by steep falls on Samsung and SK Hynix.

Meanwhile, markets had also been responding enthusiastically to the landslide election victory of Takaichi Sanae in Japan – widely seen as market-friendly in the tradition of Margaret Thatcher and keen to extend the reforms of her predecessor Shinzo Abe.

On the other hand, Sanae is also notably keen to boost spending on what she sees as strategic industries such as AI and semiconductors, defence and shipbuilding – which could also add to pressures in the Japanese government bond (JGB) market given its huge existing debt levels.

Whatever happens in the Middle East will likely have repercussions both short term and longer term on the global outlook – and of course on air freight rates, which will continue to be a key barometer of market direction.

The market is currently braced for what could be an extended period of higher volatility – potentially driven, at least in part, by modal shifts from ocean to air freight with shippers increasingly desperate to get goods to market.