The fallout from the US-Iran military conflict is reshaping the cost structure of the Middle East construction market.
Market analysis forecasts UAE tender price inflation of 6-9% in 2026 and building cost increases of up to 12%, as fuel, freight and insurance costs feed through into contractor pricing following the US-Iran conflict.
Maritime logistics sit at the epicenter of the cost surge. War-risk insurance premiums, which averaged roughly 0.25% of vessel value before the conflict, have jumped to between 3% and 8%, meaning a single large tanker transit can now carry an insurance bill of $3-8 million.
Container freight has also spiked, with spot rates estimated at 75% above pre-conflict levels on the China-US East Coast route, 51% higher to North Europe, and 45% higher to the Mediterranean. Material cost pressure is equally broad-based.
New research from cost consultancy Currie & Brown suggests that despite the recent US-Iran deal, the conflict will have a long tail, with oil price volatility driving up the cost of key construction materials including steel, copper and aluminium.
Turner & Townsend's Global Construction Market Intelligence report projects Middle East construction cost inflation of 5.1% by 2027 — the second-highest in the world after Africa's 7.0% — and warns that a prolonged or escalating conflict would produce more pronounced effects on inflation, supply chains and construction costs.
Margin pressure across the industry is no longer hypothetical. In Saudi Arabia, bankruptcy filings rose sharply in the first quarter of 2026, with two-thirds coming from retail and construction companies.
The United States is feeling the strain as well. According to the Associated General Contractors of America, producer price indexes for aluminum mill shapes and steel mill products jumped 39.1% and 20.9% year-over-year respectively — the largest increases since the supply-chain disruptions of early 2022 — while disruption of Middle East oil, gas and aluminum supplies is pushing construction costs higher and prompting owners to delay projects. Normalization is expected to take time.
Insurance brokers project that Lloyd's Joint War Committee could begin a phased downgrade of the Hormuz high-risk designation in Q4 2026 at the earliest, with full removal possible only by Q1-Q2 2027.
For steel- and shipping-intensive infrastructure projects such as major bridges, owners and contractors alike will likely need to revisit escalation clauses and risk allocation in second-half tenders.
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