Key Highlights

● WTI rose 2.18% to $104.20 and Brent climbed 2.5% to $117.80.

● Norfolk Southern and Schneider National announced an intermodal capacity partnership.

● Third-quarter GDP grew 3.4% annualized and jobless claims fell to 194,000.

● Markets price about 85% odds of another Fed hike in December.

The Dow Jones Transportation Average heads into Friday's session facing a familiar enemy: expensive fuel. West Texas Intermediate rose 2.18% to $104.20 a barrel and Brent climbed 2.5% to $117.80 as of about 7:28 a.m. ET, according to market data, after Iran said four tankers struck mines in the Strait of Hormuz and Yemen's Houthis claimed strikes on Saudi oil infrastructure.

Transports meet a fuel shock

Brent is up roughly 12% to 14% in October, depending on the source, and is at a six-month high. For companies that move goods and people, that translates into higher diesel and jet fuel bills, which can squeeze margins unless they are passed on through surcharges and fares.

Company news and the macro tug of war

There is little transport-specific news this morning. The most notable item is Norfolk Southern (NYSE:NSC)'s Partnership with Schneider National (NYSE:SNDR) to expand intermodal capacity, announced Thursday afternoon, according to a company-release feed dated Oct. 29. Norfolk Southern is a Dow Jones Transportation Average component; Schneider also reported third-quarter results after Thursday's close, though its figures were not retrieved.

Intermodal, which moves containers by rail for the long haul and by truck at each end, is typically more fuel efficient per ton-mile than trucking alone. In a high-diesel environment, that efficiency argument can help railroads win freight from highways, an inference rather than something either company has claimed today.

Outside the average, FedEx Freight (NYSE:FDXF) was indicated up 3.93% at $114.00 as of 8:23 a.m. ET, according to a premarket table, after its first Earnings report as an independent company. That table's auto-generated context cited third-quarter Revenue of $2.44 billion and EPS of $1.49, figures that could not be confirmed against a company release. Canadian National Railway (NYSE:CNI), which is not a Transports component, named Jamie Lockwood to succeed retiring CFO Ghislain Houle on Feb. 1.

The transports average is often treated as a barometer of economic activity, and the data have been sturdy. Third-quarter GDP grew at a 3.4% annualized rate, above the 3.2% consensus, and initial jobless claims fell to 194,000, according to market data. Strong Demand supports freight volumes and pricing power.

Against that, the Federal Reserve hiked in September and markets price about 85% odds of another hike in December, according to market pricing and media reports. Higher rates weigh on housing, Manufacturing and consumer spending, all of which drive shipments.

Market futures are mixed. Around 8 a.m. ET, Dow futures were roughly flat, S&P 500 futures were down about 1.1% and Russell 2000 futures about 0.6%, according to market quotes. The Russell 2000, home to many smaller trucking and logistics names, had risen four straight sessions through Thursday.

Counterarguments, risks and what to watch

Fuel surcharges cushion many carriers, particularly railroads and less-than-truckload operators, which adjust charges with a lag. Airlines are typically more exposed than railroads, since fuel makes up a larger share of their costs. A diplomatic breakthrough could also reverse oil's climb quickly; Qatari mediators returned to Tehran on Friday, according to media reports.

The main risk is escalation in the Gulf. Regional officials fear fighting could resume around the Nov. 3 midterms, according to media reports, which would keep fuel prices elevated through the holiday shipping season. A slowdown triggered by tighter Monetary Policy would hit volumes at the same time costs are rising.

Watch how transport stocks open relative to the broader market, particularly airlines and truckers. The Chicago PMI at 9:45 a.m. ET offers a read on Midwest manufacturing, Sunday's OPEC+ subgroup meeting will set December output, and next Friday's jobs report will test the demand side of the freight story.