Fuel costs, capacity crunch push transportation prices to record highs: ITS report

Fuel price spikes tied to geopolitical tensions in the Middle East are driving up transportation costs and tightening capacity across North American supply chains, according to a new report from ITS Logistics.

The company’s May Supply Chain Report says disruptions in the Strait of Hormuz have sent diesel prices soaring, compressing margins and contributing to record-high trucking rates, even as consumer demand remains relatively resilient.

“US inflation accelerated noticeably in April 2026, with the Consumer Price Index (CPI) rising 3.8 per cent year-over-year and 0.6 per cent month-over-month—the highest annual inflation rate since 2023,” said Stan Kolev, chief financial officer at ITS Logistics. “Energy prices were the main driver as geopolitical conflict involving Iran disrupted oil markets and pushed fuel costs sharply higher.”

According to the report, diesel prices are more than US$2 per gallon higher than a year ago, contributing to a surge in operating costs. The Logistics Managers’ Index recorded transportation price levels at 95, the highest on record, while dry van and refrigerated spot rates climbed more than 20 per cent above the five-year average in mid-May.

Capacity constraints are also worsening. Equipment availability has dropped by double digits year-over-year, and transportation capacity levels have fallen 40 per cent since January, reflecting a sustained exit of carriers from the market.

The report notes that regulatory changes affecting non-domiciled commercial drivers, along with a recent U.S. court decision allowing lawsuits against brokers and third-party logistics providers for hiring unsafe carriers, could further tighten capacity by concentrating demand among compliant carriers.

At U.S. ports, containerized import volumes declined against typical seasonal trends. April volumes totalled 2.28 million TEUs, down 3.2 per cent from March and 5.5 per cent year-over-year, signalling ongoing trade disruptions.

Meanwhile, warehousing conditions are shifting away from the lean inventory strategies seen in 2025. The report says warehousing prices are rising rapidly, with the index up 16 per cent over the past three months and expected to climb further over the next year.

Higher costs are also reaching end consumers. Major parcel carriers including FedEx and UPS have implemented fuel surcharges and rate increases, adding pressure across shipping networks.

“Once residential surcharges, additional handling fees, dimensional weight adjustments, delivery area charges and fuel recovery are applied, effective increases for shippers with meaningful exposure to those categories are landing in the seven per cent to 12 per cent range,” said Jeff Lolli, ITS Logistics’s vice-president of solutions engineering and small parcel.

The report says the combined impact of rising fuel costs, tightening capacity and increasing surcharges is straining supply chains and raising concerns about renewed inflationary pressure.