Impact of Middle East Conflict on UPS in 2026
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
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Should l Buy UPS?
Source: Fool
- Fuel Cost Impact: While UPS's fuel costs reached $4.3 billion in 2025, accounting for only 5.3% of total operating expenses, the adjustments in fuel surcharges could allow UPS to benefit from rising oil prices, showcasing its flexibility in cost management.
- Rising Transportation Costs: In 2025, transportation purchased from third-party carriers accounted for 13.1% of UPS's costs, and with sustained increases in fuel prices, these carriers are likely to raise surcharges, leading to increased transportation costs that could impact overall profitability.
- Rerouting Cost Increases: Disruptions in key transport corridors like the Strait of Hormuz will likely elevate UPS's costs primarily through higher purchased transportation expenses, adding to the company's cost pressures in the current environment.
- Demand Destruction Risk: Global trade conflicts and resulting inflation negatively affect UPS's small and medium-sized business customers, who are already facing tariff pressures while adjusting product sourcing, potentially leading to a decline in delivery volumes and impacting future business growth.
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Analyst Views on UPS
Wall Street analysts forecast UPS stock price to rise
19 Analyst Rating
9 Buy
9 Hold
1 Sell
Moderate Buy
Current: 97.890
Low
80.00
Averages
107.06
High
126.00
Current: 97.890
Low
80.00
Averages
107.06
High
126.00
About UPS
United Parcel Service, Inc. provides a range of integrated logistics solutions for customers in more than 200 countries and territories. Its U.S. Domestic Package segment offers a range of United States domestic air and ground package transportation services. Its air portfolio offers time-definite, same-day, next-day, two-day and three-day delivery alternatives as well as air cargo services. Its ground network enables customers to ship using its day-definite ground service. UPS SurePost provides residential ground service for customers with non-urgent, lightweight residential shipments. Its International Package segment consists of small package operations in Europe, Indian sub-continent, Middle East and Africa, Canada and Latin America and Asia. It offers a selection of guaranteed day- and time-definite international shipping services. Its supply chain solutions consist of forwarding, logistics, customized third-party logistics and specialized cold chain transportation solutions.
About the author

Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
- Fuel Cost Impact: While UPS's fuel costs reached $4.3 billion in 2025, accounting for only 5.3% of total operating expenses, the adjustments in fuel surcharges could allow UPS to benefit from rising oil prices, showcasing its flexibility in cost management.
- Rising Transportation Costs: In 2025, transportation purchased from third-party carriers accounted for 13.1% of UPS's costs, and with sustained increases in fuel prices, these carriers are likely to raise surcharges, leading to increased transportation costs that could impact overall profitability.
- Rerouting Cost Increases: Disruptions in key transport corridors like the Strait of Hormuz will likely elevate UPS's costs primarily through higher purchased transportation expenses, adding to the company's cost pressures in the current environment.
- Demand Destruction Risk: Global trade conflicts and resulting inflation negatively affect UPS's small and medium-sized business customers, who are already facing tariff pressures while adjusting product sourcing, potentially leading to a decline in delivery volumes and impacting future business growth.
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- Fuel Cost Impact: In 2025, UPS's fuel costs reached $4.3 billion, constituting 5.3% of total operating expenses, and while rising fuel prices are a concern, the company's weekly fuel surcharge adjustments could potentially enhance profit margins in a high oil price environment.
- Transportation Cost Risks: Third-party carriers accounted for 13.1% of UPS's costs in 2025, and with ongoing fuel price increases, these carriers are likely to raise surcharges, leading to higher purchased transportation costs for UPS.
- Trade Conflict Effects: Disruptions in Middle Eastern transport corridors could elevate UPS's costs, particularly as small and medium-sized business customers face dual pressures from tariffs and reduced inventory, which may negatively impact delivery volumes.
- Uncertain Future Outlook: Although UPS may navigate high oil prices, prolonged trade lane closures and persistent inflation could severely affect the company's delivery volumes and profitability, putting its stock under pressure in 2026.
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- Fuel Cost Impact: In 2025, UPS's fuel costs reached $4.3 billion, representing 5.3% of total operating expenses, yet due to adjustments in fuel surcharges, the company may benefit from rising oil prices, demonstrating flexibility in cost management.
- Rising Transportation Costs: Transportation purchased from third-party carriers accounted for 13.1% of UPS's costs in 2025, and with sustained increases in fuel prices, these carriers are likely to raise surcharges, leading to higher transportation costs that could impact overall profitability.
- Rerouting Costs: Disruptions in key transport corridors like the Strait of Hormuz will likely increase UPS's transportation expenses primarily through higher purchased transportation costs, further compressing profit margins.
- Demand Destruction Risk: Global trade conflicts and inflation negatively affect UPS's small and medium-sized business customers, who are expected to reduce inventory through 2025, potentially leading to a decline in delivery volumes and impacting market performance.
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- Market Capital Comparison: Both FedEx and UPS have market caps around $83 billion, but UPS has seen a 40% decline over the past five years while FedEx's market cap has increased by 15%, highlighting a significant divergence that reflects a reassessment of UPS's value by the market.
- Business Restructuring Progress: UPS is undergoing a substantial business overhaul aimed at becoming a leaner and more agile company, shedding low-profit customers and assets, with expectations for a turnaround in the second half of 2026; if financial performance continues to improve, it may achieve a higher market valuation.
- Valuation Metrics Analysis: FedEx's price-to-sales ratio stands at 0.95 and its price-to-earnings ratio is nearly 20, while UPS has a price-to-sales ratio of 0.97 and a price-to-earnings ratio of 15; although UPS appears relatively cheap, its restructuring context may make it more appealing to value investors.
- Growth Potential Assessment: FedEx recently raised the low end of its fiscal 2026 guidance, indicating that its business is performing better than management initially expected, and despite UPS's restructuring phase, both companies remain competitively positioned in the long term due to the growth in e-commerce.
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- Market Cap Comparison: FedEx's market cap is approximately $83 billion, surpassing UPS for the first time, with UPS's market cap declining by 40% over the past five years while FedEx's has increased by 15%, indicating differing market perceptions of their values.
- Business Overhaul: UPS is undergoing a significant business overhaul aimed at becoming a smaller, more agile company by shedding low-profit customers and investing in new facilities, with expectations for improvement in the second half of 2026.
- Valuation Analysis: FedEx's price-to-sales ratio stands at 0.95x and its price-to-earnings ratio is nearly 20x, both above their five-year averages, while UPS's price-to-sales ratio is 0.97x and its price-to-earnings ratio is 15x, suggesting UPS may appeal to value investors due to its historical cheapness.
- Future Outlook: Despite UPS's transformation challenges, both FedEx and UPS are expected to benefit from ongoing e-commerce growth, particularly as FedEx has raised its fiscal 2026 guidance's lower end, indicating better-than-expected business performance.
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- Market Share Shift: FedEx's market cap stands at approximately $83 billion, surpassing UPS, which has seen a 40% decline in market cap over the past five years, indicating a waning market confidence in UPS that could affect its future financing capabilities.
- Business Restructuring Progress: UPS is undergoing a significant business overhaul, aiming for a turnaround in the second half of 2026; despite a decline in total revenues, revenue per piece has risen, demonstrating the effectiveness of its strategy to focus on profitable customers.
- Valuation Comparison: FedEx's price-to-sales ratio is 0.95x and its price-to-earnings ratio is nearly 20x, while UPS's price-to-sales ratio is 0.97x and its price-to-earnings ratio is 15x, indicating that UPS appears historically cheaper, which may attract value investors.
- Growth Potential Assessment: Although UPS's valuation is lower, FedEx shows greater growth potential, having just raised its fiscal 2026 guidance's lower end, suggesting that its business performance is exceeding expectations, making it a suitable choice for growth-oriented investors.
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