Adds details throughout and updates share price

July 23 (Reuters) - Union Pacific UNP.N reported a rise in second-quarter profit on Thursday, as strong freight demand and pricing gains overshadowed an increase in operating costs.

U.S. railroads have capitalized on pricing strength and operational discipline, while efforts to improve network reliability and on-time performance have helped support freight volumes and attract new business.

The West Coast railroad operator's second-quarter net income was up 6.6% at $2 billion, or $3.36 per share, from $1.9 billion, or $3.15 per share, a year earlier.

The company's revenue jumped 12% to $6.86 billion from a year earlier. Its freight revenue also rose 12% to $6.52 billion in the quarter.

However, elevated fuel costs remain a key challenge for transportation companies after U.S.-Israeli strikes on Iran sent energy prices sharply higher, squeezing margins across sectors from trucking and logistics to airlines in one of the biggest disruptions since the COVID-19 pandemic.

U.S. average gasoline prices rose above $4 a gallon in March for the first time in more than three years, capping the sharpest monthly increase in decades.
Prices currently remain around the $4-per-gallon mark, keeping fuel-intensive industries under pressure.

Shares of the company were up marginally in premarket trading.