EasyJet has warned investors it will report a £540 million to £560 million loss for the six months ending April, up from £394 million a year earlier, citing a £25 million hit from surging jet fuel costs driven by Middle East tensions. The budget airline's shares fell 3 percent in morning trading as analysts expressed concern about the broader impact on the sector.

Fuel prices have doubled since the Iran war began, forcing airlines to reassess their profitability forecasts. Delta Air Lines revealed this month it expects a $2 billion fuel cost increase and plans to cut routes and raise passenger charges to recover half of that hit. EasyJet has hedged 70 percent of its summer fuel needs, its busiest period, but analysts warn the combination of higher costs and potential demand softening could slash the airline's annual profits by up to 70 percent.

Despite reporting its busiest Easter holiday period ever, EasyJet cautioned about near-term uncertainty around both fuel costs and customer demand as passengers delay bookings. The company also set aside £30 million for legal costs related to historic cases. CEO Kenton Jarvis acknowledged the financial performance has worsened year-on-year, impacted by Middle East conflict and competitive pressures in key markets.