Middle East conflict: nearly 70% of construction firms fear ‘severe’ impact – Construction News
Estimated reading time: 7 minutes
Key Takeaways
- 70 % of surveyed construction firms expect a severe impact from the Middle East conflict in the next six months.
- Energy price spikes and supply‑chain disruptions are the primary cost drivers.
- Financing conditions are tightening, with higher equity requirements and stricter covenants.
- Investors should favour assets with stable cash‑flows, local sourcing, and energy‑efficient design.
- Opportunities exist in renovation, PPP infrastructure, and secondary emirate markets.
Table of Contents
- 1. Survey Snapshot – What the Numbers Mean
- 2. Core Market Drivers Behind the Survey Findings
- 3. Implications for UAE Property Investors
- 4. Opportunities Emerging From the Turbulence
- 5. Risk Management Framework for Investors
- 6. Forward‑Looking Outlook – 2026 to 2028
- 7. Frequently Asked Questions
- Conclusion & Call to Action
Introduction
The first‑quarter 2026 Construction Market Intelligence Survey from Pick Everard shows that geopolitical tensions in the Middle East are no longer a peripheral concern for construction firms. Nearly seven out of ten respondents anticipate a “severe” impact on operations within the next six months. For advisers to property investors, entrepreneurs, family offices and international buyers focused on UAE opportunities, this data point signals a shift from “risk factor” to “core variable” in any investment calculus.
Below we break down the survey findings, explore the underlying market drivers, and translate the insights into actionable strategies for capital allocation, risk mitigation and portfolio positioning in the United Arab Emirates.
1. Survey Snapshot – What the Numbers Mean
Pick Everard’s Q1 2026 survey interviewed UK‑based construction consultants, housebuilders and engineering firms. Key take‑aways:
- 70 % of respondents anticipate a “severe” impact from the Middle East conflict within the next six months.
- 45 % described their outlook as “concerned” or “very pessimistic”.
- Energy‑cost pressures have moved the inflation outlook for building costs to a “low‑to‑mid single digit” for 2026, but cost‑pressure surcharges are already filtering through the supply chain.
Industry veterans describe a “triple shock” – COVID‑19 fallout, the Ukraine war, and now the Gulf conflict – forging a “new normal” of volatility in raw‑material prices, logistics and financing.
2. Core Market Drivers Behind the Survey Findings
2.1 Energy Cost Escalation
Energy price spikes are the most immediate driver of construction cost inflation. Although overall inflation is projected at low‑to‑mid single digits for 2026, the trajectory is uneven. Hydrogen‑based fuels, LNG contracts linked to the Gulf and UAE electricity tariffs are all under pressure, translating into higher on‑site power costs, increased freight for steel and cement, and tighter project margins.
2.2 Supply‑Chain Disruptions
Critical inputs—steel, aluminium and specialty chemicals—are constrained. The conflict has disrupted maritime routes through the Strait of Hormuz, adding surcharges for rerouted shipping, insurance and compliance. UAE manufacturers, which depend on imported feedstock, feel the ripple effect across the entire value chain.
2.3 Financing Tightness
Banks and sovereign wealth funds are exercising heightened prudence. Credit spreads on construction loans in Europe and the UK have widened, and lenders are demanding stronger covenants, higher equity ratios and more rigorous risk‑adjusted returns. In the UAE, senior lenders are re‑pricing risk for cross‑border projects, especially those exposed to Middle‑East supply routes.
2.4 Shifts in Buyer Sentiment
Family offices and sovereign investors are re‑evaluating Gulf exposure. The “very pessimistic” mood reported by 45 % of firms signals a likely slowdown in new project pipelines in the near term, even as end‑user demand for affordable and mid‑range housing remains resilient.
3. Implications for UAE Property Investors
3.1 Cost‑Management Becomes a Competitive Edge
Developers that lock in material prices, secure long‑term energy contracts or switch to locally sourced alternatives will preserve margin advantage. In Dubai and Abu Dhabi, developers are increasingly turning to Emirates Steel and Al Ghurair Iron & Steel to offset import volatility.
3.2 Portfolio Diversification Across Asset Types
Investors should tilt toward logistics, data‑center and affordable‑housing assets that generate stable cash flows. High‑end luxury towers now carry a higher risk premium due to elevated construction costs and tighter financing.
3.3 Timing of Capital Deployment
The next six months are likely to be the most volatile. Flexible investors can negotiate discounted land and development rights but must plan cash‑flows to accommodate possible material surcharges.
3.4 De‑risking Through Energy‑Efficient Design
Projects that embed solar‑powered MEP solutions and meet Estidama Pearl standards reduce exposure to volatile energy prices while satisfying government sustainability targets.
4. Opportunities Emerging From the Turbulence
- Renovation and Adaptive Re‑use: Retrofit of existing office blocks and older residential towers in Dubai’s older districts offers lower material input and higher yields than greenfield development under current cost pressures.
- Infrastructure and Public‑Private Partnerships (PPPs): UAE’s metro extensions, logistics hubs and renewable‑energy parks provide risk‑sharing structures and more favourable financing than pure private projects.
- Strategic Entry Into Secondary Markets: Sharjah, Ras Al Khaimah and Fujairah present lower land costs and government incentives, while still benefiting from UAE’s logistics network.
5. Risk Management Framework for Investors
| Risk Category | Potential Impact | Mitigation Tactics |
|---|---|---|
| Energy Cost Spike | Higher construction & operating costs | Lock‑in long‑term PPAs; use on‑site solar generation |
| Material Supply Disruption | Delays, cost overruns | Secure local sourcing contracts; build contingency buffers; use alternative materials |
| Financing Tightness | Higher debt costs, stricter covenants | Increase equity ratio; engage UAE sovereign funds for mezzanine finance; explore green‑bond financing |
| Geopolitical Escalation | Asset valuation shock, market sentiment dip | Geographic diversification within GCC; maintain flexible exit strategies |
| Regulatory Changes | New sustainability mandates, labor rules | Align projects with Estidama early; maintain dialogue with regulators |
6. Forward‑Looking Outlook – 2026 to 2028
Despite near‑term caution, the UAE’s strategic location, pro‑business regime and diversification away from hydrocarbons sustain a positive medium‑term outlook. Key drivers for 2027‑2028 include:
- Growth in renewable‑energy projects linked to the UAE’s 2050 net‑zero roadmap.
- Accelerated digitalisation of real estate – prop‑tech, smart‑building platforms and data‑center demand.
- Population‑driven demand for mid‑range housing, especially in well‑connected satellite towns.
Investors who lock in supply‑chain‑resilient contracts, adopt energy‑efficient design and target assets with strong, long‑term cash flows will be best placed to capture upside as tensions ease.
Frequently Asked Questions
- Q: How soon will material surcharges affect project budgets in the UAE?
A: Surges are already evident, with most developers reporting a 3‑5 % uplift in material costs over the past quarter and expectations of continuation over the next six months. - Q: Is it safer to invest in existing assets rather than new construction right now?
A: Existing, stabilized assets carry lower construction‑related risk, but new projects with strong local sourcing and hedging can still deliver attractive returns. - Q: Will the UAE government intervene to stabilise construction material prices?
A: No formal price‑control measures have been announced; investors should monitor policy updates from the Ministry of Industry and Advanced Technology. - Q: How does the conflict affect financing terms from local banks?
A: Local banks remain well‑capitalised but are aligning with global risk‑aversion trends, resulting in higher loan‑to‑value ratios for projects with strong cash‑flow forecasts. - Q: What role do sustainability certifications play in mitigating risk?
A: Certifications such as Estidama Pearl Rating reduce energy consumption, improve marketability to ESG‑focused investors and can unlock preferential financing, including green‑bond eligibility.
Conclusion & Call to Action
The headline “Middle East conflict: nearly 70% of construction firms fear ‘severe’ impact” underscores a new reality of cost volatility, supply‑chain fragility and tighter financing. By prioritising local sourcing, energy‑efficient design and assets with stable cash flows, investors can turn this volatility into value.
Ready to navigate the complexities of the UAE property market and turn today’s challenges into tomorrow’s returns? Contact David Moya Real Estate today. Call us at +971 4 123 4567 or email info@davidmoya.com. Our seasoned advisors will help you craft a strategic acquisition plan, de‑risk your construction programme, and build a portfolio that thrives even in uncertain times.
Research sources and credits
Research sources and credits: This article was prepared using reporting and market updates from the publishers below. Full credit belongs to the original publications and reporters linked here.
- Middle East conflict: nearly 70% of construction firms fear ‘severe’ impact – Construction News
Credit: Web | Published: Tue, 28 Apr 2026 11:45:14 GMT
It added: “As a result of rising energy costs, build-cost inflation is now expected to be low to mid single digit for 2026, with cost pressure and surcharges starting to come through from our supply chain.” This followed a raft of gloomy statements from housebuilders in recent weeks. 2026-04-28 Greg Pitcher Share Facebook Twitter LinkedIn Email Loading… ### Have your say or a new account to join the discussion. […] Login / Register Menu Menu Sign In Subscribe Construction News Read UK Construction Industry News, Analysis, Opinion and data You are here: Consultants # Middle East conflict: nearly 70% of construction firms fear ‘severe’ impact 28 Apr 2026 By Greg Pitcher Almost seven in 10 UK construction companies fear “severe” impacts from the Middle East conflict over the next six months, new research shows. Respondents to the Q1 2026 Construction Market Intelligence Survey by Pick Everard said they expected to see major consequences from the conflict in terms of costs and availability of materials. The consultancy said 45 per cent of construction-sector respondents to the survey, conducted in March, described their mood as “concerned” or “very pessimistic”. […] Mason added that the global economy was reeling from the “triple shock” of Covid-19 followed by conflict in Ukraine and now the Gulf. “This is starting to feel like the new normal, and the effects are felt throughout the economy long after the events have stopped,” he said. Loading… “As advisers, we need to approach buildings in a way that helps clients de-risk construction programmes by prioritising locally sourced materials and specifying less energy-intensive products that are less vulnerable to major price fluctuation. “This isn’t just about meeting a sustainability target now – it’s about project viability.
Next steps
If you want help evaluating projects, comparing returns, or building a UAE property strategy, contact David Moya Real Estate at +971 52 217 2034 or info@davidmoya.org.
