Conflict in Middle East causes construction sector uncertainty
Mace Consult has published its first quarterly Market View on UK construction for 2026, drawing attention to the current conflict in the Middle East and how its longevity is likely to impact the sector.
What is clear is that the conflict is creating further uncertainty which will contribute to fragile business confidence and may delay some schemes. Ultimately, as the report states, the impact of oil and gas price rises depends on how long the Strait of Hormuz is impacted.
If the recent surge in prices continues it is almost certain that material prices will rise more than expected at the start of the year and lead to mounting pressure on businesses. Material prices picked-up last year, and with pressures likely to mount, organisations will need to have particularly disciplined commercial judgement going forwards.
As a result, Mace Consult’s tender price forecasts for 2026 have increased by 0.5%. While forecasts for 2027 and beyond remain unchanged, although the conflict makes the longer-term outlook harder to predict.
Assuming, however, the conflict in the Middle East doesn’t cause inflationary issues, the report highlights that the prospects for the industry overall continue to be positive.
The strongest indicator for how construction will perform this year remains the volume of new orders placed in 2025 (+12.6%), which were noticeably stronger than in the previous two years. What is less clear is how quickly new orders will result in higher output.
In any case, it is the public sector and infrastructure schemes which are enjoying the most growth, which at least in the short-term are likely to be more protected.
Ceri Evans, Global Director of Cost and Commercial Management, Mace Consult, says:
“The UK is more dependent on global oil and gas markets than other economies, and the government has less headroom in its budget to protect organisations from the impacts of a prolonged conflict in the Middle East.
“Certainly, in the short-term, the prices of more energy-intensive products will be most affected such as glass, cement and steel, as well as plastic products which use oil, and higher transport costs will also be an issue.
“Ultimately, though, if the conflict ends quickly, then the effect on the UK economy and the UK construction sector shouldn’t be too severe, but a prolonged impact on the Strait of Hormuz will underscore the need for accelerated investment in renewables, electrification and wider energy security to improve resilience against geopolitical crises.”