Construction materials may get pricier on rising energy costs, Middle East conflict

Higher energy and freight costs are putting upward pressure on costs of construction inputs such as aluminium and cement. (Photo: Unsplash)

The escalating conflict in the Middle East is having a growing impact on global construction supply chains as energy markets and shipping routes are affected.

Project owners and developers worldwide, including those in Asia Pacific (Apac), face heightened exposure to material cost volatility and delivery risk, says construction consultant Linesight.

At the centre of the disruption is the Strait of Hormuz, the narrow waterway through which some 20 million barrels of crude oil pass daily. It remains effectively closed as of March 11.

Escalation around the critical waterway has increased logistics risk, lifted war-risk insurance and bunker costs, and added a risk premium to crude oil and liquefied natural gas (LNG).

These costs are now filtering through to construction input prices, notes Linesight in a March 9 report.

While exposure varies by region, Asian markets rely most on oil and LNG flows through the Strait, and any sustained disruption to supply will tighten global energy balances and raise industrial power costs for importers.

This matters for construction because energy is a primary cost driver in the production of steel, aluminium, cement and copper. Higher energy costs could pass through to quarrying, calcination, smelting and transport — making energy the primary channel from geopolitics to construction budgets.

Aluminium in particular faces pressure as the Gulf produces about 9% of global primary aluminium, most of which is exported, and regional smelters rely on imported alumina.

Shipping disruption around the Strait of Hormuz has triggered force majeure declarations and operational curtailments. These have pushed aluminium prices and physical premiums higher, with London Metal Exchange prices reaching a four-year high and warehouse withdrawals increasing — signs of near-term supply stress.

Steel is exposed because it is both energy intensive and logistics sensitive. In 2022, steel prices reached their peak in response to a surge in crude oil prices. In the first week of March 2026, crude futures jumped by nearly 22% as markets priced Gulf risk.

Crude oil vs steel prices:

Source: World Bank, Linesight

Apac steel markets are seeing trade flows shift as Asian exporters reassess Middle East routes. This has created localised price noise, instead of outright shortages, unlike in other regions such as Europe, writes Derek McNamara, Linesight vice president, global supply chain management.

As for cement, its production is highly energy intensive. Even modest changes in fuel and power costs can feed quickly into production and transport.

In 2021 and 2022, cement prices rose sharply as global energy markets tightened and oil prices climbed, driving higher kiln fuel, electricity and freight costs across most regions.

Meanwhile, copper prices have swung dramatically between early 2022 and early 2026, reaching record highs amid geopolitical crises.

Copper prices have surged anew recently, hitting fresh highs by January 2026 due to tight supply and robust demand particularly from green energy and data-centre construction projects.

While the Middle East is not a major copper-producing region, it is a critical supplier of sulphur, which is needed for copper ore processing. With nearly half of global sulphur exports at risk, copper smelters now face potential acid shortages. This raises costs and could slow the output of refined copper, putting upward pressure on prices.

Linesight suggests project owners act early to limit cost and programme exposure.

Diversifying their sources of steel and key aluminium supplies will help reduce exposure, according to the construction consultant. Project owners could prioritise suppliers with alternative port options and flexible routings.

They may also need to increase contingencies for heavy, import-dependent packages where freight is a large share of the cost.

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