Stakeholders throughout Australia’s building sector are being encouraged to consider several actions to mitigate the effect of current fuel-related disruptions on construction projects.

And the market is being warned to prepare for significant cost increases in the event of a prolonged conflict.

In a special edition of its Market Insight report, Rawlinsons Cost Data has analysed the likely impacts of the conflict on Australia’s construction sector.

Rawlinsons is Australia’s leading and most trusted platform for current and historic cost information in respect of both residential and commercial building projects.

According to the report, the impact of the conflict should not be underestimated.

“On 28 February 2026, coordinated US and Israeli airstrikes on Iran triggered an escalation that materially disrupted global energy markets,” the report says.

“The Strait of Hormuz, a critical shipping corridor carrying approximately 20% of global oil and gas supply, became effectively inaccessible to Western commercial shipping.

“Vessels are now required to reroute via the Cape of Good Hope, significantly increasing transit times and fuel consumption.

“These events have introduced heightened uncertainty into global supply chains, with downstream impacts now evident across the Australian construction industry.”

Time and cost impact

According to the report, the crisis is affecting both the cost and time that is associated with project delivery.

In terms of cost, the report considers two indicative scenarios.

These are:

• A short-lived disruption under which fuel prices normalise by mid-2026 and freight and program impacts remain minor.
• A more prolonged scenario in which elevated fuel prices persist through to late 2026 and beyond. Such a scenario would see a sustained cost escalation across materials, logistics and preliminaries as well as a greater impact upon long-duration projects.

Under the first scenario, Rawlinsons forecasts an overall impact on commercial building projects in metropolitan areas of between one and two percent above baseline 2026 escalation forecasts.

Under the more prolonged scenario, the cost impact for similar projects is forecast at an additional six to nine percent over and above baseline expectations.

For other types of projects, the effect will be more severe.

Civil and infrastructure projects are expected to experience more pronounced effects as these projects use more diesel fuel and have greater exposure to supply/price issues for asphalt and bitumen.

Impacts will also be higher for projects which are located in regional areas.

According to the report, rising fuel prices are affecting construction projects through:

• higher operating costs for diesel-powered plant, equipment and site vehicles
• increased transport and logistics costs for materials, components and services; and
• upward pressure on building and material prices driven by supply-chain disruption and pricing volatility.

The effect is significant.

Since the beginning of the crisis, prices for bitumen and asphalt have risen by between 30 and 50 percent whilst those for plastic pipes have risen by between 30 and 40 percent.

Meanwhile, substantial price increase are also evident in respect of concrete, aluminium cladding, glazing, reinforcing and structural steel, laminated timber and quarry products (see chart).

These increases have reflected a combination of direct fuel costs and indirect impacts such as higher resin prices and constrained production capacity, the report says.

It warns that one of the most immediate areas of cost and project risk involves freight volatility and disruption to freight and logistics.

This is particularly the case with regard to imported building products and specialist equipment.

Indeed, the report notes that global container shipping rates for international freight increased by around 25 percent during March, with significantly higher rates being observed on routes which are close to the Middle East.

Meanwhile, domestic freight operators and suppliers have been applying surcharges which are typically in the range of between 10 and 25 percent since the crisis began.

Aside from costs, the report warns that supply-chain disruption has also resulted in longer and less-predictable lead times for procurement.

It cautions that the reliability of previously stable suppliers should no longer be assumed.

This is especially the case in respect of current high-risk categories such as mechanical and electrical equipment, façade and glazing systems and fixtures and specialist imported components.

This raises the importance of early procurement strategies, the report says.

Impacts on contracts and procurement

All this is affecting contracts and procurement.

In terms of contracts, the report warns that many contractors have limited protection only against fuel-driven price escalation.

Reasons for this include that:

• force majeure provisions are often narrowly defined
• supply-chain disruption and insurance withdrawal may be excluded, and
• relief is commonly limited to time adjustments, without cost recovery.

The upshot is that for most existing contracts, contractors will be forced to absorb the cost increases and will not be able to recover these through adjustments to contract prices.

For new projects, contractors are increasingly pricing higher levels of risk into their tenders.

In addition, the report says that several trends are emerging in respect of procurement.

These include:

• shorter tender validity periods (the timeframe after the tender submission deadline during which bidders are required to keep their offers open and legally building whilst the client evaluates bids and proceeds with contract awarding).
• reduced appetite for fully fixed-price contracts
• widespread inclusion of material escalation clauses
• greater use of qualifications which transfer project risk to principals; and
• contractor preference for early procurement of ‘critical-path’ trades and materials.

Action needed

In response, the report says that industry stakeholders should consider several strategies.

These include:

• proactive review of contract risk allocation and escalation provisions
• early and disciplined procurement planning for high-risk packages
• transparent risk-sharing arrangements between project parties
• ongoing monitoring of fuel markets, freight costs and supplier capacity; and
• early and consistent communication to support informed decision-making.

It says that the value of action should not be underestimated.

“While no single strategy eliminates volatility, a structured and collaborative approach can materially improve project resilience and delivery outcomes,” it says.

With current and historic cost data dating back to 1983, Rawlinsons Cost Data is Australia’s leading and most comprehensive platform for current and historic construction cost information.

With a live, web-based platform and an easy-to-use interface, you’ll be able to leverage the nation’s most comprehensive cost information solution to perform better, faster and more accurate estimates on your next project.