Construction sector starting to feel economic headwinds of Iran war
Tuesday, 31 March 2026
It’s about to get slower, harder and more expensive to build, with some industry leaders predicting this economic shock could be worse than that of the Covid-19 pandemic.
A familiar wariness is emerging that the tide is turning on the construction sector - again - as the war in Iran puts pressure on fuel prices and supply chains.
“It’s feeling very reminiscent of what it was through the Covid-times, 2021 to 2022,” New Zealand Certified Builders Association chief executive Malcolm Fleming told The Post.
Quotable Value has reported rapidly rising diesel prices, particularly in fuel-intensive areas of work like excavation costs that have gone up 7.8% in the last month.
Read more:
Iran war: No relief on the horizon as diesel hits $3.44, overtakes petrol price
PM says he’ll make final call on LNG terminal, Energy Minister suggests not much has changed
Fleming said the year had started with “good signals” but hard-fought progress to boost construction activity post-pandemic was now on the line.
“This is another significant headwind. We really don’t need this. The country doesn’t need this, not just our sector.”
Building Industry Federation of New Zealand chief executive Julien Leys shared Fleming’s concern about rising prices but added he was also worried construction materials may stop being shipped to the bottom of the world altogether.
“One of the things we saw during Covid that seems to be rearing its head again is unfortunately with some of the big container shipping companies like Maersk, MSC, CMA, CGM, they will tend to start prioritising their most lucrative markets and where it's most economic to go to.
“What we saw during Covid was that some of those companies would go to Australia and then suspend some of their shipping across to New Zealand because it just wasn’t cost beneficial to them.”
Leys said the pressures felt like the start of another pandemic, only worse.
“Looking back at Covid, while there were restrictions on movement we could still see ways of getting goods around even if there were ports or different manufacturers that had to slow production because of their workforces being ill.
“It didn't completely shut down but the prospect of having shipping disrupted to the extent where we may stop seeing vessels bringing stuff that's on another level.”
Tony Sutherland, managing director of the Wellington division on Rider Levett Bucknall, said small businesses would be hardest hit.
“The construction industry has a lot of smaller businesses, the mum and dad type investors that it actually does impact. We're not always talking about the 100 or 1000-employee businesses, it starts to impact the businesses that actually have sub-10 people in them; people's lifeline. So there's that weariness of what impacts it can have on smaller business as well.
Building and Construction Minister Chris Penk is getting regular briefings by the Ministry of Business Innovation and Employment on possible “pressure points” in the system.
They included disruption to supply chains for construction materials, increasing shipping costs and the extra expense borne by tradespeople moving between jobs,“ he told The Post.
“It’s not so much that price increases have come through from overseas yet but I know, at least anecdotally with my own ear to the ground in the sector as well as receiving official briefings, some costs have been increased almost in anticipation; in the same way that we see petrol and diesel prices at the pump increase.”
Penk said the Government would continue to monitor the situation and “react as necessary”, though whether this meant construction would be classified as an essential activity under the National Fuel Plan was still unclear.
“I'm confident that good decisions will be made in that space but it would be pre-emptive and presumptuous for me to say that that will certainly be the case.”