13 hours ago
With the ongoing conflict in the Middle East drawing global attention, United Parcel Service (NYSE: UPS) investors are questioning how this situation might impact the company in 2026. The effects could be significant, but perhaps not in the ways many expect. Here are five key points investors should consider about UPS.
Rising oil prices due to the conflict naturally raise concerns about UPS's fuel expenses. While UPS is exposed to fuel costs, the impact may be less direct than assumed. In 2025, fuel costs of $4.3 billion represented only 5.3% of UPS's total operating expenses of $80.8 billion.
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Secondly, UPS applies weekly fuel surcharges based on jet, kerosene, and diesel fuel prices. In recent years, these surcharges have more than offset fuel costs, effectively becoming a net contributor to profit margins rather than just a cost recovery mechanism.
If this trend continues amid current market conditions, higher fuel prices could, all else equal, actually benefit UPS.
| UPS Metric | 2024 | 2025 |
|---|---|---|
| Fuel cost change | ($409 million) | ($50 million) |
| Fuel surcharge change* | ($270 million) | $282 million |
| Difference | $139 million | $332 million |
Data source: UPS SEC filings. *Domestic segment surcharges.
While direct fuel costs are not a major concern, UPS is likely to face challenges in the current environment. The company relies on third-party carriers for transportation, which accounted for 13.1% of its costs in 2025. Prolonged fuel price increases will likely cause these carriers to raise their surcharges, increasing UPS's purchased transportation expenses.
Disruptions in key Middle Eastern transport routes, such as the Strait of Hormuz and the Jebel Ali port in Dubai, are expected to raise UPS's costs primarily through higher purchased transportation fees.
Global trade conflicts that drive inflation are unfavorable for package delivery companies. Notably, UPS's small- and medium-sized business customers are already feeling the effects of tariffs as they adjust their product sourcing strategies.
