Over the past month, the impact of the Middle East conflict on construction supply chains has become clearer.
In several areas, market behaviour has followed the expected pattern. In others, the scale and speed of disruption have exceeded base‑case assumptions.
With previous market shocks, driven either by conflict or the pandemic, it took up to three months for the industry to see the full effects on the supply chain and projects.
So even with a fragile ceasefire now in place, experience tells us we are yet to see the full impact of the conflict.
Following on from our original article in March, here is what we have tracked within the market as the conflict has evolved.
Immediate impact on energy and logistics
As anticipated, disruption around the Strait of Hormuz fed quickly into oil, gas and shipping markets. The International Energy Agency confirmed the steep fall in volumes through the strait, triggered a surge in crude prices and higher bunker and insurance costs for shipping. This reinforced the view that even partial disruption at a major chokepoint is enough to reprice energy and logistics before physical shortages emerge.
Freight rerouting intensified existing constraints
Carriers reverted to longer routes around the Cape of Good Hope, compounding the Red Sea–Suez disruption seen through 2024 and 2025. UNCTAD reported a sharp collapse in daily transits through Hormuz and warned the effects were now spreading into wider trade and inflation pressures. For construction, this has already translated into longer lead times, higher landed costs and less reliable delivery windows for import‑dependent materials.
Price volatility outpaced availability risk
As expected, some commodities responded first through pricing rather than physical scarcity. In some cases, steel, cement and aluminium suppliers shortened quote validity, added surcharges and delayed offers. The Industry experienced cost noise rather than immediate lack of materials, consistent with earlier geopolitical shocks.
Unexpected market response
Aluminium disruption escalated more quickly than forecast
The speed at which aluminium supply tightened surprised the market. Within days, Qatalum halted production following energy disruption, Aluminium Bahrain declared force majeure on shipments, and regional premiums in Europe and the US rose sharply. Argus described aluminium as the most directly exposed major metal, with prices and premiums reacting faster than other non‑ferrous commodities. This moved aluminium from a secondary risk to a primary exposure for global construction projects reliant on façades, cable and power infrastructure.
Energy impacts proved broader than oil alone
While oil price volatility was expected, the knock‑on effects into LNG, electricity pricing and industrial energy costs were deeper than initially anticipated. The halt at Qatar’s Ras Laffan LNG hub tightened gas markets, increasing power costs for energy‑intensive manufacturing inputs such as cement, steel and aluminium, even in regions physically distant from the conflict.
Logistics stress indicators reached levels not seen since 2022
Global supply‑chain stress measures climbed back toward early‑2022 peaks, reflecting front‑loading, port congestion and reduced effective capacity across multiple routes. UNCTAD’s April rapid assessment highlighted how quickly disruption at Hormuz cascaded beyond energy into trade, finance and manufacturing, increasing the potential risk of a broader and deepening crisis.
Energy impacts on commodities
From a construction cost perspective, oil prices provide important context. However, they cannot be treated as a single indicator for forecasting material costs. While metals historically showed strong correlation with oil, in recent years demand dynamics have shifted. There remains some similarities, most major materials are now pricing including additional underlying risks.
For example, while oil is a proxy for energy stress, and aluminum is highly sensitive to energy costs, aluminium prices traditionally moved in correlation with oil, as energy-cost pressures triggered smelter curtailments and tightened physical supply, the two commodities have increasingly decoupled due to structural and policy-driven factors.
Copper and oil prices also once moved closely together, as oil costs flowed through mining, processing, and transport. That link has weakened in recent years. Although both are industrial commodities, copper pricing is now shaped primarily by energy‑transition demand such as electric vehicles, data centres, and grid expansion, while oil prices are driven by transport fuel consumption and supply‑side dynamics.
During times of market stress, such as economic downturns or supply disruptions, steel prices can closely track movements in oil prices. This co-movement reflects the shared impact of broader economic factors on both sectors. Despite this correlation, it is important to note that, over the long term, steel pricing is primarily determined by factors unique to the steel industry. Specific supply and demand dynamics, including production levels, inventory management, and regional market conditions, ultimately shape steel price trends.
In the below we look at how the conflict has influenced commodity prices over the past month.
Each commodity has been analysed based on some core factors, including raw material inputs, energy intensity, supply concentration, logistics exposure, and demand outlook.
The conflict has not triggered widespread material shortages, but it has reintroduced structural volatility across energy‑linked and import‑dependent construction inputs. Where markets are oversupplied and demand is weak, such as European steel, price escalation is being tempered. Where supply chains are concentrated and logistics‑dependent, such as aluminium and some cementitious materials, risk has amplified more quickly.
To mitigate delivery risk during the conflict, project teams should focus on early protection of the critical path, clear ownership of cost and supply risk, and greater optionality in sourcing and logistics. This starts with identifying critical packages that rely on imported or energy‑intensive inputs and building practical schedule resilience through earlier procurement, added float and avoiding just‑in‑time delivery where exposure is high. At the same time, cost and supply risk should be made explicit and shared, using scenario‑based allowances linked to energy and freight movements and ensuring contracts clearly address surcharges, disruption and force‑majeure events.
In summary, developers and manufacturers should hedge energy exposure, diversify suppliers, and build contractual flexibility into projects to mitigate cost volatility driven by conflict-related disruptions
The key variable to this situation remains duration. Short‑lived disruption is likely to result in continued volatility and programme friction. Prolonged disruption could force a reset of cost baselines and procurement strategies across regions.
