Freight Faces a New Wave of Fuel Pressure

Fuel costs re-emerged as a major point of uncertainty in July after several months of relative calm. Diesel prices had steadily retreated following their surge in March and April, falling roughly $1 per gallon over nine consecutive weeks as markets stabilized. That trend reversed sharply, however, following renewed conflict in Iran, with diesel prices climbing $0.73 in just three weeks and erasing the majority of the prior decline. The rapid swing shows how sensitive fuel markets remain to geopolitical developments in the Middle East, even after periods of apparent stability. For carriers and shippers alike, the reversal is a reminder that fuel surcharge programs and cost forecasting should continue to account for elevated volatility, particularly as broader freight capacity remains constrained.

Forecasts for active truck utilization have softened in the near term, but the outlook strengthens by the end of the year. This improved 2027 outlook is driven primarily by expected constraints on capacity entering or re-entering the market. Much of this forecast hinges on the actual impact of regulatory changes, including foreign driver rules and ELD mandate changes.

The Logistics Managers' Index (LMI) hit its lowest point since April, coming in at 28.40. A reading below 50 signals capacity constraint, while a reading below 30 signals severe capacity constraint.

Demand fundamentals continue to look healthy heading into the back half of the year. A stabilizing economy and strengthening commodity markets are supporting freight volumes, with 2026 truck loading forecasts holding steady at +1.5% y/y and 2027 building on that strength at +2.0% y/y. Spot volumes, which had spiked earlier on a wave of tender rejections, have settled into calmer territory. Dry van demand stood out this month, with strong automotive loadings helping volumes rebound to +1.6% y/y, up from +1.3% previously. Refrigerated and flatbed held steady, with no notable shifts in their forecasts this month.

Rates are showing early signs of leveling off after a sustained run higher. The 2026 forecast held firm at +18.3% y/y, with contract rates projected at +9.9% y/y and spot rates at +36.1% y/y, a sign that the market may be settling into its current pricing environment rather than continuing to accelerate. The more telling shift is further out. The 2027 rate outlook strengthened to +8.3% y/y, up from +5.7% previously, reinforcing the broader theme that carriers should expect a tighter, higher-rate environment to build over the next couple of years even as things calm down in the near term.

The freight market carried its momentum from June into July, with tightening capacity and firming rates continuing to shift leverage back toward carriers. Capacity remains constrained, and while the outlook for the back half of this year is stabilizing, forecasts for 2027 are actually strengthening, largely on expectations that regulatory changes, including foreign driver rules and ELD mandate enforcement, will make it harder for capacity to enter or re-enter the market. Demand has held up well alongside this, supported by a stabilizing economy and stronger commodity markets, with dry van in particular getting a lift from robust automotive volumes. Adding to the volatility this month is fuel. Diesel prices, which had been steadily retreating after their March and April surge, reversed sharply as renewed conflict in Iran erased weeks of decline in a matter of days. Between tightening capacity, a firming long-term rate outlook, and renewed geopolitical pressure on fuel costs, shippers should brace for a market that continues to reward carriers and stay reactive to fast-moving conditions.