UPS and FedEx Are Charging More for Every Pound That Moves. The Iran War Is Why.

Most shipping cost models built before March are already out of date. The surcharge wave hitting UPS and FedEx this month is not a pricing anomaly. It is the Iran war and the Strait of Hormuz closure working their way through to the last mile.

UPS added a Surge Emergency Fee on April 19 applying to a wide range of US import and export shipments. Shipments between the US and most countries now carry a $0.23 per pound charge applied until further notice, while shipments from China and Hong Kong to the US face a $0.32 per pound fee across seven UPS international services. The Middle East corridor is in a different category entirely. UPS began applying a $1.34 per pound surge fee for shipments to and from Middle East countries on March 22, and a $1.50 per pound fee for shipments to and from Israel and the UAE. 

FedEx is moving in the same direction. Both carriers have raised their fuel surcharge calculations on import and export services. If jet fuel costs $4 per gallon in a given week, FedEx now applies a 38.5% fuel surcharge for international exports, up from the previous 36.5% at the same fuel price. DHL eCommerce is also set to increase its fuel surcharge calculations for domestic products from May 30. 

Why the numbers are bigger than they look

Fuel surcharges are not a flat fee applied to the final invoice. They compound on top of base rates, accessorial charges, and now the surge fees themselves. The TD Cowen/AFS Freight Index reported that ground fuel surcharges rose 26.7% year over year in the first quarter, outpacing a 10% increase in diesel fuel prices over the same period. The gap between fuel price increases and surcharge increases is the margin carriers are recovering after a period of compressed profitability. 

Higher fuel surcharges contributed to another record-high quarter for UPS and FedEx ground delivery costs. The fresh surge fees present another example of how parcel shipping cost pressures emerge in less obvious ways outside of base rate changes. For procurement teams reviewing logistics budgets, the line item that changed is not just fuel. It is the multiplier applied to every shipment that crosses a border.

The Iran war connection

Surcharges linked to fuel prices have risen amid the Iran war and disruptions in the Strait of Hormuz, which continue to squeeze global oil supply. On an April earnings call, UPS CFO Brian Dykes explained that the company manages fuel through surcharges, noting that its indexes protect profits from the impact unlike passenger airlines. That framing matters. UPS and FedEx are not absorbing the cost of the Iran war. They are passing it through, systematically and by design.

The mechanism is straightforward. Higher oil prices flow into jet fuel and diesel costs. Those costs flow into surcharge tables, which are reviewed and adjusted on weekly or monthly cycles. UPS and FedEx have adjusted the rates behind their fuel surcharges several times in recent quarters, escalating their impact when the fuel prices they are tied to increase. There is no ceiling on this process while oil remains elevated. 

The exposure for European and Asian companies

For any business moving goods into or out of the US by parcel or express freight, the landed cost calculation it was using three months ago is structurally wrong. Experts suggest that shippers can limit the impact of surcharges through negotiated discounts, reducing other parcel-related costs, or exploring alternative carrier options. For international fuel fee hikes, shippers are advised to update their cost models and landed-cost calculations to understand the impact, and to cross-reference carrier increases to assess exposure at the carrier level. 

That advice assumes the surcharge environment stabilises. While the Strait of Hormuz remains closed and oil stays above pre-conflict levels, there is no reason to assume it will.