Global Construction Cost Newsletter | Compass International

Executive Summary

Crude oil prices have risen to more than $100 a barrel in the last month, due, for the most part, to the conflict with Iran and the latest attacks by the Houthis on shipping in the Red Sea. The Iran–U.S. conflict has now lasted more than six months.

The vital shipping route in the Red Sea is under siege by Iran-backed Houthi rebel forces based in Yemen. Shipping vessels, especially oil tankers, are being attacked on what seems to be a daily basis. Houthi rebels have also attacked and shut down Saudi Arabian pipelines and have attacked refinery installations. This situation is impacting the cost of crude oil and driving up both gasoline and diesel prices globally.

The Iran conflict is causing serious problems for its neighbors: the UAE, Qatar, Bahrain, Saudi Arabia, Jordan, Oman, Iraq, Kuwait, and Lebanon. These countries have been targeted by drones and missile attacks from Iran. Some refineries, petrochemical and gas facilities, and supporting infrastructure have experienced serious damage over the last six months.

Currently, between 300 and 500 ships, including LNG vessels, VLCC oil tankers, bulk carriers, and cargo ships, are stranded in the Strait of Hormuz waterway as of the end of September. At this time, only 5 to 10 ships a day, or fewer, are exiting this waterway. Before the conflict, between 100 and 150 ships made this journey each day. It could take three to six months for traffic to return to normal.

U.S. gasoline and diesel prices are up by 23% from mid-May, which is extremely bad news for construction companies and consumers. The U.S. is an exporter of energy products and, for the most part, is in somewhat better shape than many other countries.

The Iran conflict has increased global construction costs, affecting both materials and labor, and has contributed to longer project delivery times. Ocean freight and insurance costs have also experienced major increases.

The U.S. Federal Reserve recently raised interest rates by a quarter of a point and indicated that rates may increase in the short term, possibly in two or three months. Higher borrowing rates could influence some owners and developers to place future projects on hold or, in some situations, cancel future projects and developments.

The rapid evolution and investment in AI data centers are impacting U.S. construction. AI data centers in the U.S. are being built at a torrid pace, while other construction sectors are watching from the sidelines.

AI data center construction activity has exceeded traditional commercial construction activity, such as hotels, offices, and shopping centers. Billions of dollars are pouring into AI data center development. Look for this trend to continue for the next 12 to 18 months, at least. Virginia, Texas, California, and Ohio are among the states receiving this investment.

There will continue to be high demand for architects, engineers, contractors, and specialty subcontractors to build out these complex, expensive, and demanding facilities.

Global demand for Small Modular Reactors (SMRs) is increasing significantly as more and more AI data centers are announced. These AI data centers require substantial amounts of electricity to function. Look for more announcements of this type of power source in the coming months.

The U.S. and Denmark have established a new security agreement related to Greenland that is favorable to the U.S. and opens the door for U.S. companies to develop future oil and gas and mining operations, as well as numerous future military installations.

Insurance rates and ocean freight costs continue to increase by as much as 15% year over year. At this time, there are many risks around the world, and these increases are a measure of those risks.

In Venezuela, a new dawn has broken since the capture of President Maduro in January 2026 by U.S. military forces. Look for Venezuela to reemerge as a major global supplier of oil and gas in the next 6 to 12 months, with the potential to produce 2.5 million or more barrels of oil per day by mid-2027. Numerous mid-sized EPC projects are expected to commence as soon as possible in Cardón, Amuay, and the Orinoco Belt locations. For the most part, these projects will be Upgrade / Modernization / Revamp EPC-type projects.

The next one to five years’ outlook for Venezuela is to upgrade, revamp, and modernize existing underutilized refinery and gas assets. There will be many EPC opportunities related to the oil and gas sector in the coming years.

The 10 Risks / Challenges the Global Construction Industry Will Face in Q4 2026 & Beyond

The Iran–Israel–U.S. conflict could drag on for months or years, potentially causing amajor global recession.
The shipping route in the Red Sea is under siege by Iran-backed Houthi rebel forces.
The continuation of the Russia–Ukraine war.
China’s future trade and territorial aspirations and a possible attack on Taiwan.
The issues surrounding the “AI” transformation and future competition between the U.S. and China.
High construction material costs and U.S. tariffs. Construction material costs haveincreased by close to 30% in the last three years. Are more increases on the way?
Acute shortages of skilled labor in North America, Europe, and Australia/NewZealand continue to be a problem.
Persistent inflation and high interest rates continue to be a problem in some countries, particularly in commercial and residential construction.
The future of tariffs on imported equipment and materials.
The U.S. Federal Reserve continuing to raise interest rates.

Hopefully, some of these issues will be resolved in the near future and beyond.

Key Global Construction Growth Sectors in Q4 2026

AI data centers: Located in the U.S., Europe, and Asia, spending on these facilities isforecast to double last year’s spending.
Semiconductor / microchip facilities: Look for expenditures to increase by 5% to 10% from 2025.
Pharma, high-tech, and manufacturing: CAPEX is expected to climb by 4% to 6% from 2025 levels.
Infrastructure: Government-funded work such as highways, bridges, heavy marineand tunnel civil work, and rail is set to increase by 4% to 7% from 2025 levels.
Power / pipeline projects: With SMR nuclear power plants now back in the mix, CAPEX is expected to climb by 4% to 7% from 2025 levels.

Q4 2026 Economic — Construction Cost Metrics & Inflation Outlook for 12 Major Countries

Rank	Country	2026 GDP $ Trillions Forecast	Latest 2026 GDP Growth Forecast %	Construction Unemployment Forecast %	Construction Inflation Forecast %	Construction Forecast
1	USA	31.5	2.2%	4.1%	3.5% - 4.8%	Doing reasonably well, lots of AI, LNG projects, skilled labor shortage continues. See above for possible problems ahead. Is this Iran vs. USA conflict over? Or will it drag on for months? Oil & Diesel prices have increased by 8% to 10% in last 4 weeks.
2	China	19.9	4.2%	5.1%	0.9% - 1.6%	Construction activity is slowing down. Over supply of housing units is a major problem. China gets more than 60% of its oil from Iran, could be a big problem with the current Iran conflict.
3	India	7.9	7.7%	5.4%	3.9% - 4.7%	Going gangbusters, lots of infrastructure projects in the pipeline. Oil prices increasing will impact future construction costs and growth.
4	Germany	4.9	0.9%	4.1%	2.7% - 3.4%	Limited construction growth, nothing much to get excited about. Higher Oil & Energy prices due to the current Ukraine & Iran conflict will stymie future growth. Oil prices have increased by 10% to 12% in last 4 weeks.
5	Japan	4.3	0..6%	2.6%	2.1% - 2.8%	Very slow, nothing to get excited about. New Prime Minister might stir things up. Increased energy prices will not be helpful to the construction sector.
6	UK	3.8	1.3%	5.1%	3.3% - 3.7%	Construction in the doldrums. Noting much to get excited about, new SRU’s is positive, special relationship with USA is getting old. Higher energy prices will impact future growth outlook in 4th Q. UK has a new Prime Minister.
7	France	3.4	0.8%	8.9%	2.9% - 4.1%	Same as last year, nothing much to write home about. Increased energy prices will impact on construction prices. Petrol / Diesel prices have increased by 7% to 10% in last 4 weeks.
8	Italy	2.5	0.9%	6.1%	1.7% - 3.2%	Very slow going, major bridge connecting Sicilia to mainland is the big news. Increased oil / energy prices will be a problem. Oil prices have increased by 7% to 12% in last 4 weeks.
9	Brazil	2.5	0.3%	5.1%	5.2% - 6.3%	Like last year, there is nothing to write home about. A global slowdown could be a serious issue.
10	Canada	2.4	1.1%	6.8%	2.9% - 3.3%	The US & Canada are in the middle of a trade dispute; tariff increases seem to be announced on a daily basis. Political wrangling with its big southern neighbor is not good, the Canada economy is 15% the size of the US, hopefully this problem will be solved by the next quarter. A global slowdown will stymie construction activity. Energy prices have increased by 8% to 10% in last 4 weeks.
11	Russia	2.3	1.3%	6.2%	6.3% - 8.9%	Struggling as we move further into 2026, inflation up, rubel down. Higher oil prices going forward will be very helpful to the Russian construction sector. Russia is suffering major casualties from the ongoing Ukraine conflict.
12	Mexic0	2.3	2.2%	298%	3.1% - 4.1%	The construction sector is performing reasonably well. Continuing cartel / drug-related violence continues to put a damper on the tourist sector.