The Iran conflict brings with it ripples across the globe, with a major shipping impact relating to the country's role in the oil industry. As goes oil to some degree goes diesel - which fuels freight transportation and is one of two key contributors (along with linehaul) to freight costs.
So two key questions are worth addressing: Just how much are gas prices expected to rise (and when and how long) due to the geopolitical situation in the Middle East? And with trucking rates already elevated, how should shippers respond as they strategize their transportation planning for 2026?
Following the U.S.-Israel action against Iran at the beginning of March, oil prices have risen rapidly. Prices of Brent crude (the most common global oil type) surged to nearly $120 a barrel Monday before easing a bit to around $90, with West Texas intermediate (produced in the U.S.) following a similar peak before landing at about $86 as of this writing. The fallback was partially due to comments from President Trump that the conflict would end "very soon," though mixed messages will likely keep fluctuations going.
The correlation with diesel is undeniable, as AAA has the national average for diesel at $4.78 per gallon, up $0.89 from just a week ago. The U.S. Energy Information Administration (EIA) tracks diesel on a weekly basis, and the latest from them looks even worse, at $4.86 per gallon, 96 cents higher than last week (and $1.28 above last year incidentally).
About 20% of the world's oil supply typically travels through the Iran-adjacent Strait of Hormuz, which sees tankers from several Middle Eastern countries carrying both raw oil and refined gas. Traffic through the strait has certainly been challenged though, due to threats of attack by Iran. On top of that, refineries and other oil facilities have been hit by attacks relating to the conflict.
The Energy Information Administration (EIA) notes that crude oil cost is the most significant component in retail diesel prices - accounting for about 50% of the monthly average from 2004-2023. In fact, costs correlate quite consistently, meaning fluctuations in oil caused by geopolitical events such as the Iran conflict (or Russia-Ukraine - the last time prices were this high) directly impact the price at the pump
Just as oil prices are a major contributor to diesel costs, so too are fuel is a major contributor to freight costs - accounting for around a quarter of overall spend. As such, freight rates will most always be a base fee for linehaul, plus a fuel surcharge. That means fuel is a must to include in any freight calculations.
Taking it a step further, most carriers start with a baseline diesel price, which they typically set as a projected average for the year, and then apply a fuel surcharge based on how far the actual market price moves above that baseline. If diesel stays in line with projections, that surcharge is negligible to potentially not there at all.
But on the flipside, when oil (and diesel) prices soar due to an unforeseen event like the Iran conflict, not only will fuel surcharges potentially soar with them, they can also factor into the baseline rate. Carriers - especially in the truckload space - see higher operating expenses when diesel rises.
To cover their own increased costs when the fuel surcharge is not enough, they may also raise linehaul rates. Similarly, shippers who use an all-in rate structure will see increases as well - even if they're not directly exposed to the fuel cost breakdown. Regardless of how a shipper pays though, when fuel prices go up, so will freight costs.
A fuel surcharge (FSC) is a fee carriers levy to protect themselves against unanticipated jumps in fuel prices. Carriers generally apply an FSC when fuel prices go up. For truckload or intermodal, surcharges may be added as a rate per mile, or in many cases, they are calculated as a percentage of the base freight rate.
Either way, because oil prices - and thus diesel prices - tend to fluctuate based on market conditions and world events, FSCs also fluctuate. They can be anywhere from non-existent if diesel is low to significant when the price at the pump rises rapidly.
Because fuel surcharges can adjust weekly, shippers should closely monitor their freight provider’s fuel matrix (typically provided with the initial quote) and how it tracks with the national diesel fuel average published every Tuesday morning by the EIA.
While both truckload and intermodal use diesel to power freight movement, intermodal swings less on fuel costs thanks to the efficiency of its characteristic long-haul rail segment. It's a simple fact that trucks use more fuel to transport less cargo, and that disparity comes into sharpest focus when diesel prices are high. Looking deeper at just how stark the efficiency difference is:
Rail is four times more fuel efficient than trucks
One ton moves at roughly 470 miles per gallon via intermodal, vs 105-130 mpg for truck alone
A single train carries the equivalent of 280 truckloads
Though intermodal providers including dray carriers and railroads do add fuel surcharges when prices go up, the fact that less fuel is being used means shippers don't get hit as hard by those increases. And particularly on the railroad side, their scale means baseline rates are less likely to be affected compared to truckload.
The simplest way to control fuel costs is modal conversion. For domestic freight, that means shifting more loads to intermodal when practical. Intermodal transportation typically saves 10-15%, and that savings increases in periods marked by diesel fuel volatility and higher truckload rates.
According to Cleveland Research, 45 million lanes are ripe to convert from truckload to intermodal. Yet intermodal still only makes up an estimated 5-6% of total domestic freight tonnage. With the ability to double stack containers on trains blanketing the continent, the opportunity is clearly there.
And the best news in this scenario is, that switching is easy. Shippers unsure of how to get started can simply reach out to an intermodal logistics company like InTek Logistics, to get an evaluation of which lanes work and which lanes may not - then get the best lanes up and running fast (often a matter of a couple of days).
Other actions that can help with fuel costs include load optimization (packing containers or trailers to their fullest avoiding shipping air), LTL (less than truckload) consolidation (as full truckload and intermodal are less expensive), and route optimization (finding the most efficient, lowest cost routes to get freight where it needs to go).
The price hike that's occurred since March began due to the Iran conflict has made the expectation of lower diesel prices for 2026 unlikely to say the least. Our 2026 diesel price forecast had the average per gallon dropping 7% from last year to an average of $3.50.
With the latest weekly average diesel price coming in at $4.86 per gallon, the cost would need to drop considerably as the year goes on to meet the original projection. And with the end of the conflict up in the air - along with more than 9 months left this year - seeing significantly lower prices on the horizon seems tough.
As a reminder, we noted that four primary components influence diesel pricing:
Forecasters expected production to be no problem in 2026, with global crude oil production (and U.S.-only production) to be steady and inventories strong throughout the year. With Middle East oil facilities getting hit by attack, some of that steadiness is in doubt. And, of course, getting oil and finished diesel to the places that use it is also a challenge.
Even before the Iran conflict, diesel had already been rising (though not dramatically) since the year began. The first quarter was always expected to be the highest of 2026, with chances that Q2 would dip considerably. That second quarter drop looks unlikely as of now, even if the situation settles. After all, prices tend to go up much faster and more drastically than they go down.
There are also other ongoing variables that could keep prices up, including the Russia-Ukraine conflict, tariffs, inflation, overall demand uncertainty, and any escalation/spread of geopolitical tensions (along with potential natural disasters). In sum, it seems far more likely than not that diesel will be up this year vs. last (and the highest it's been in awhile).
If you need help finding your way to savings with escalating diesel costs, our experts here at InTek are here to help. Simply fill in our brief form, and we'll get right back to you with solutions to fit your needs. For more information about InTek, or logistics and supply chain issues in general, check out our Freight Guides.