Geopolitical conflict and rising transport costs pressure construction industry liquidity
Thursday 2 July 2026
Geopolitical tension in the Strait of Hormuz is driving up oil prices, transport costs, and construction material inflation, squeezing contractor margins and liquidity.
Geopolitical conflict is driving up construction material prices and transport costs, putting significant pressure on contractor working capital and industry liquidity.
Tensions in the Strait of Hormuz, a critical route for global oil, have triggered shipping rerouting and elevated risk premiums. This disruption has led to higher crude oil prices, more expensive transport, and renewed inflation across various construction inputs.
Steel has proven particularly vulnerable to these market shifts due to its energy-intensive production process and its sensitivity to transport disruptions. Rising oil prices have subsequently driven up both production and freight costs, resulting in higher landed prices, longer lead times, and increased pressure on project programmes and contractor margins.
According to the latest RICS UK Construction Monitor, material costs are projected to rise by 7.5% over the next year, while tender prices are forecast to increase by 5.6%. In the same monitor, two-thirds of respondents identified financial constraints as the primary obstacle to ongoing construction activity, highlighting how rapidly cost inflation translates into a critical liquidity issue for building firms.