Executive Summary
Two major geopolitical events happened in the 1st Q of 2026.
#1 - was the January 3rd, 2026, where the USA conducted military strikes on Venezuela, ending in the capture of President Maduro, by USA special forces in Caracas Venezuela. Look for Venezuela to re-emerge as a major global supplier of oil and gas in the next 6 to 12 months, with the potential of producing 2.5 or more million barrels of oil per day.
Look for many EPC mid-sized projects to commence ASAP in Cardon, Amuay and the Orinoco belt locations. These projects (for the most part) will be Upgrade / Modernization / Revamp EPC type projects.
#2 - The USA and Israeli military forces on 2/28/2026, attacked Iran’s current leadership, culminating with the death of 40+ political leaders. The ongoing Middle East conflict could escalate precipitously, potentially driving oil prices above $150 to $200 a barrel.
Both of these major events will have consequences on Global Construction costs and project durations for the remainder of 2026.
The crisis is already impacting some Middle East and Asian economies such as UAE, Qatar, Kuwait, Japan, Thailand, Philippines and Indonesia, some working a shorter workweek, natural gas prices are increasing rather rapidly in some countries.
Aluminum production / refining that need significant amounts of electrical / energy are extremely at risk to increased oil prices.
The US is an exporter of energy products and for the most part is in better shape than many countries.
The Iranian conflict is pushing crude oil prices to over $100 a barrel, a $45 a barrel increase in a 2–3 week period. It is extremely difficult to forecast how long this conflict will last and the impact it will have on the Global Economy and the Global Construction sector.
The ongoing conflict could initiate a spike in inflation in just about all countries and could possibly cause a global depression in the next 3 to 6 months. It is hard to estimate how long this conflict will last at this time.
The Straits of Hormuz is a 21-mile-wide passage where 40% of the world’s oil supply passes though. If this passageway is blocked by mines and drones this could seriously escalate the current conflict.
Economic experts currently are forecasting a minimal GDP reduction to most major countries; however, this situation may change in the next couple of months.
Look for many force majeure contract suspensions and future claims, when a company cannot meet its scope of work when an event is beyond its control that prevents implementation.
Immediate Global Cost Impact to Construction Materials in Q2 2026
| Material | % Increase (Q2 2026) |
|---|---|
| Aluminum products | 5% to 15% |
| Inland / Ocean Freight | 5% to 12.5% |
| Electrical components / Instrumentation devices | 5% to 10% |
| Cable / Copper products | 5% to 10% |
| Steel / rebar | 4% to 7% |
| HVAC components | 4% to 6% |
| Windows / Door / Curtain wall systems | 4% to 6% |
| Paint products | 3% to 6% |
| Lumber / Plywood | 2% to 4% |
| Drywall / Gypsum products | 2% to 4% |
| Process / Utility Pipe CS / SS | 2% to 4% |
| PVC piping | 2% to 4% |
| Siding | 2% to 4% |
| Bricks / Concrete blocks | 2% to 4% |
| Roofing Products | 2% to 4% |
| Cement production | 2% to 3% |
| Pre-Cast Concrete products | 2% to 3% |
| Ready Mixed Concrete | 1% to 3% |
The Iran situation is having an impact on its neighbors - Saudi Arabia, UAE, Bahrain, Jordan, Qatar, Iraq and Kuwait. All countries have been impacted by drones and missile strikes from Iran; some refineries and LPG facilities have been seriously damaged. Once the conflict ceases, the dust settles down and more information is available on increased construction materials / freight costs and the loss of labor productivity that was suffered due to these ongoing attacks we will provide more detailed information. We will survey our extensive Mid-East contacts and share our findings related to material cost increases and productivity loss with our connections in our 3rd Q newsletter. A long, drawn-out blockade of the Strait of Hormuz, where 60% of the world’s oil passes, could result in oil prices spiking to more than $100 a barrel. Latest news is that the USA has sent Iran a 15-point plan that includes Iran giving up on its nuclear weapons and research programs and opening the Strait of Hormuz to all vessels. When a settlement is reached with Iran, the repairs to oil and gas and other infrastructure facilities could be significant and keep many EPC companies busy for a year or two.
Venezuela: A New Dawn
In Venezuela, a new dawn has broken since the capture President Maduro on 1/03/2026 by US military forces. In the first half of 2026, numerous CAPEX refinery projects in Venezuela will commence. These initial projects will be concentrated on Revamp / Rehab / Modernization / De-Bottlenecking projects in the neglected domestic refining sector. These production and infrastructure facilities are basically worn out and not capable of producing Venezuela production potential of 3.5 million barrels a day. A number of US & International Oil companies are committed to working on future projects. Look for projects to commence ASAP in Cardon, Amuay and the Orinoco belt locations. The next 1-to-5-year outlook for Venezuela is to upgrade / revamp / modernize / upgrade existing underutilized refinery & gas assets. There will be many EPC opportunities related to the Oil / Gas sector in the coming years.
The 7 Risks / Challenges the Global Construction Industry Will Face in 1st Half of 2026 & Beyond
- The Iran vs. Israel / USA conflict could drag on for months, that could cause a major global recession.
- The continuation of the Russia vs. Ukraine war.
- China’s future trade and territorial aspiration and a possible attack on Taiwan.
- High construction material costs and US tariffs. Construction material costs have increased by close to 20% in the last 30 months, are more increases are in the pipeline.
- Acute shortages of skilled labor both in North America, Europe and Australia / New Zealand.
- Persistent inflation and high interest rates continue to be a problem in some countries, particularly related to commercial / residential type construction work.
- The future of tariffs on imported equipment and materials.
Key Global Construction Growth Sectors in 2026
- AI Data centers located in USA, Europe & Asia - spending on these facilities is forecast to double last year’s spend.
- Semiconductor / microchip facilities - look for expenditures to increase by 5% to 8% from 2025.
- Pharma & Hi Tech & Manufacturing, CAPEX to climb by 4% to 6% from 2025 levels.
- Infrastructure work funded by Governments such as highways, bridges, heavy marine / tunnel civil type work and rail, is set to increase by 5% to 9% from 2025 levels.
- Power / Pipeline projects, with nuclear power now back in the mix, CAPEX is set to climb by 4% to 7% from 2025 levels.
- 2026 should see a gradual lowering of borrowing / interest rates, which could spur construction growth in the US.
Artificial Intelligence (AI) will continue to advance across all areas of the construction industry. The jury is still out on which “people” related jobs will be lost to computer generated (AI) activities. Prominent software development industry leaders predict that (AI) will replace millions of “white collar” workers in the next 5 to 10 years. However, blue-collar workers like Carpenters, Electricians, Plumbers & others may not be impacted by (AI).
Q2 2026 Economic — Construction Cost Metrics & Inflation Outlook for 12 Major Countries
| Rank | Country | 2026 GDP ($T) Forecast | Latest 2026 GDP Growth Forecast % | Construction Unemployment Forecast % | Construction Inflation Forecast % | Construction Forecast |
|---|---|---|---|---|---|---|
| 1 | USA | 31.3 | 2.7% | 3.9% | 3.3% | Doing reasonably well, lots of AI projects, skilled labor shortage continues. See above for possible problems ahead. |
| 2 | China | 19.9 | 4.1% | 5.7% | 1.4% | Construction activity is slowing down. Over-supply of housing units is a major problem. China gets more than 50% of its oil from Iran, this could be a big problem with the current Iran conflict. |
| 3 | India | 5.9 | 7.1% | 6.8% | 3.9% | Going gangbusters, lots of infrastructure projects in the pipeline. Oil prices increasing will impact future construction growth. |
| 4 | Germany | 4.8 | 0.3% | 3.9% | 2.9% | Limited construction growth, nothing much to get excited about. Higher oil prices due to the current Iran conflict will stymie future growth. |
| 5 | Japan | 4.3 | 1.6% | 2.6% | 2.9% | Very slow, nothing to get excited about. The New Prime Minister might stir things up. Increased oil prices will not be helpful to the construction sector. |
| 6 | UK | 3.8 | 1.4% | 4.8% | 3.7% | Construction in the doldrums. Nothing much to get excited about, NRU’s is positive, special relationship with USA is getting old. Higher oil prices will impact future growth outlook in 2nd Q. |
| 7 | France | 3.4 | 0.8% | 6.2% | 1.8% | Same as last year, nothing much to get excited about. Increased oil prices will impact construction prices. |
| 8 | Italy | 2.5 | 0.6% | 6.1% | 1.7% | Very slow, major bridge connecting Sicilia to mainland is the big news. Increased oil / energy prices will be a problem. |
| 9 | Brazil | 2.5 | 3.3% | 6.1% | 5.2% | Like last year, there is nothing to write home about. A global slowdown could be a serious issue. |
| 10 | Canada | 2.3 | 1.8% | 7.1% | 2.9% | A global slowdown will slow construction activity. Political issues with its big southern neighbor are not good at this time. |
| 11 | Russia | 2.3 | 1.3% | 2.7% | 7.5% | Struggling as we move into 2026, inflation up, ruble down. Higher oil prices going forward will be very helpful to the Russian construction sector. |
| 12 | Mexico | 2.3 | 1.6% | 2.8% | 4.4% | Performing reasonably well. Will the war in Iran and a global economic slowdown impact the Mexican construction sector? Recent cartel / drug-related violence will put a damper on the tourist sector. |
Q2 2026 Prices at a Glance
- Forecast Cost of a barrel of Crude Oil: $85 – $125
- Forecast of Euro / US $ Exchange Rate: 0.83 – 0.88
- Forecast of UK Pound / US $ Exchange Rate: $1.34 – $1.37
- Forecast of Structural Steel per pound: $1.40 – $1.60
- Forecast of Copper per pound: $4.50 – $4.80
- Forecast of Gold per Ounce: $4,600 – $5,250
- Forecast of Aluminum: $1.30 – $1.50 / pound
- Forecast of 3/4” 4’ x 8’ CDX PT sheet of plywood: $52.25 – $57.00
- US Construction Material Inflation (Basket of 10 construction materials): 2.8% – 3.8% — Average 3.3%
