When the joint strikes on Iran by the United States and Israel, in an initiative geared towards halting Iran’s development of nuclear weapons, began in late February, an argument could have been made that the war would lead to increased usage of intermodal by shippers.
A primary driver for that expectation was, and remains, the rapid escalation in energy prices. The average price per gallon of diesel gasoline has increased roughly 28% since the Iran conflict began, and the average price per barrel of WTI crude oil has increased by around 28%, for the same period.
But in the early days of the war, as energy prices began to quickly jump, a material shift by shippers to intermodal was slow to materialize. But that began to change for a few different reasons. One being an ongoing tightening in both trucking capacity and demand. What’s more, a research note published at the beginning of the Iran conflict by Baird & Co. analyst Daniel Moore observed that intermodal operates under what he called a distinct model that not only benefits economically from higher fuel prices, in that intermodal carriers are profitable on higher share, as well as increasing market share.
“Intermodal is roughly [around] 70% more fuel-efficient than traditional truckload, which means rising fuel costs widen its relative advantage and drive incremental volume,” wrote Moore.
To that end, it now appears that since then that more shippers are leveraging intermodal, due to the aforementioned rising energy prices and tighter trucking capacity, with the latter being largely related to various federal government actions related to non-domiciled CDL (commercial driver licenses) revocations and English language proficiency provisions, and increased oversight of driver training schools.
That was made clear in data provided to LM by the Intermodal Association of North America (IANA), which pointed to an 11.6% annual gain in June intermodal volumes, with year-to-date volume through June up 2.5% annually. This was also evident in data from the Association of American Railroads (AAR), which showed intermodal volumes up nearly 4% annually on a year-to-date basis through the week of August 8, with total July volume setting a new record for the month.
“Year-to-date intermodal volume through July this year is a record high,” said AAR Chief Economist Rand Ghayad. “That’s no accident. It reflects a combination of excellent current rail service levels; higher trucking costs associated with higher diesel prices and fewer available drivers; and continued strong consumer demand for goods. Together, those factors have put 2026 on pace to be the best year in intermodal history.”
Andrew Sibold, Director of Economics and Freight Policy, at IANA, explained that the Iran conflict has definitely played a role in the shift to intermodal, with energy prices being a driver—with the caveat that there are other factors at play, too.
“Diesel prices are a factor, but the labor supply shortage that is happening in trucking has been the primary driver of that shift, I think,” he said. “And I expect that to continue in the future, especially during this administration. There is no reason that will change over the next two-to-three years, with the same going for diesel prices. Even if there is a durable ceasefire, it is likely that diesel prices will remain elevated just because that risk now that needs to be factored in.”
As trucking capacity has exited the market, due in large part to a supply-side contraction, that led to shippers figuring out where that capacity is going to be coming from, in order to meet their needs, according to Rick LaGore, CEO InTek Intermodal Logistics. He also noted shippers need to pay close attention to future capacity shifts, for both intermodal and trucking, should demand return in a meaningful way.
“Shippers need to be paying attention to these dynamics earlier than later and plan for them,” said LaGore. “It definitely falls into a plan for the worst and hope for the best-type of situation. Intermodal currently presents a great opportunity for shippers to find capacity, particularly in tight-capacity markets that exist today. There are really some green shoots in intermodal today, which go back to what is happening on the truckload side, where we are seeing significant price increases as well as capacity issues. The natural place for shippers to go, if that is what they are seeing, is for them to transition more of their freight over to intermodal.”
