The month-to-month inflation rise in March was the largest on record in a survey that has existed for 29 years, according to major media reports. S&P Global said the difference in a reading for cost inflation between February and March was the largest it had ever recorded since data collection began in 1997. This large spike in inflation squeezed profit margins and forced firms to cut jobs at a faster pace, multiple reports indicate. Tim Moore, S&P Global economics director, noted that escalating inflationary pressures, gloomy domestic economic prospects and higher borrowing costs were widely cited concerns in March.
Construction businesses cut jobs at a faster pace in March, according to major media. Fuel, transportation and raw material costs all piled pressure on construction companies which were already suffering from high labour and borrowing costs, a survey of around 150 firms found. Jobs worries will also likely concern Labour government officials intent on hitting a target to build 1.5m homes by the end of 2029, multiple reports suggest. Pantheon Macroeconomics analysts stated that the declining number of jobs across construction came as a result of weaker pipelines of work.
The overall construction purchasing managers’ index reading, which measures activity, inched up to 45.6 from 44.5 in February, according to major media. The PMI reading was higher than economists expected but remained far below the 50-figure benchmark for no change in activity. The sector's activity lengthened a 15-month streak of contractions, reports indicate. Tim Moore added that the drop in confidence during March wiped out the steady improvements in business optimism reported since the Autumn Budget.
U.S.-Israel joint military strikes on Iran have caused economic aftershocks, including a blockade of the Strait of Hormuz driving up oil and gas prices, according to research from seven sources. U.S. West Texas Intermediate crude settled above $100 per barrel for the first time since July 2022, and Brent crude settled at $112.78 per barrel, the research indicates. Oil prices have soared to close to $120 per barrel due to the Strait of Hormuz closure, which handles about 20 million barrels of oil daily, according to the US Energy Information Administration. This discrepancy between $112.78 and close to $120 per barrel indicates uncertainty or different reporting times regarding the exact impact of the blockade on global oil prices, affecting assessments of economic severity.
Construction price inputs rose at a 12.6% annualized rate during the first two months of 2026, with nonresidential construction inputs up 1.3% month over month in February, according to an Associated Builders and Contractors analysis. Natural gas prices jumped 10.9% month over month in February, unprocessed energy materials rose 6%, and crude petroleum tacked on 4.7%, research from seven sources shows. These increases occurred before the full impact of the Iran conflict, setting a high baseline for further inflationary pressure.
The war in Iran pushed up input price inflation for March to the highest level recorded for more than three years, according to a survey cited by major media. The data does not include the impact of surging oil prices due to the war in Iran, which could cause more pain going forward, research from seven sources indicates. The disruption of oil, natural gas, and aluminum supplies from the Middle East is pushing up construction costs and causing owners to delay projects, according to Ken Simonson, AGC chief economist. Kiran Raichura, Capital Economics commercial real estate economist, warned that the high inflation reading was a cause for concern given it was only likely to climb further as higher oil and gas prices feed through to construction costs.
Sustained high energy prices could reduce 2026 global GDP forecast by 0.3 percentage points and lower trade growth by 0.5 percentage points, according to a WTO report. Global energy markets dependent on imported fossil fuels are at the mercy of commodity markets due to the Middle East crisis, with risks of higher costs and geopolitical risk premiums, research from seven sources indicates. Prolonged escalation could cause energy price spikes to spill over into core economic indicators like inflation, interest rates, and GDP growth, the research adds. Bruce Kasman, global head of economics at JP Morgan, suggested a scenario with the Strait of Hormuz closed for an additional month could lead to oil prices rising towards $150 per barrel.
Fewer than 1 in 4 contractors expect their profit margins to shrink over the next six months, according to Anirban Basu, chief economist for ABC. This relative optimism comes despite the severe cost pressures, suggesting some firms may be able to pass on costs or have already adjusted expectations. However, the extent to which construction companies are passing on increased costs to clients or absorbing them remains unclear, directly affecting profitability assessments.
Forecasters have already suggested the government would not hit its target to build 1.5 million homes by 2029 while the effects of lower costs from planning rule changes may only be felt closer to the next General Election, according to major media. The achievability of this housing target is now further clouded by the economic headwinds from the energy crisis and construction sector struggles. The exact impact on housing delivery timelines has not been quantified.
Key unknowns persist, including the exact number of jobs cut in the UK construction sector in March and whether the 1.5 million homes target is still achievable. The specific timeline for when the Strait of Hormuz blockade might end and its full economic impact also remains uncertain, complicating planning for businesses and governments. How much the war in Iran has directly contributed to construction cost inflation versus other factors like fuel and raw material costs is not precisely known.
Further uncertainties surround the extent of cost pass-through to clients and the direct inflation impact from Iran. Kiran Raichura noted that a drop in confidence and expectations for new orders would lead to softer construction activity, even if the war in Iran draws to a close after a ceasefire. International responses are emerging, with Fatih Birol, International Energy Agency executive director, stating that releasing stockpiled oil will help comfort markets but is not a solution. Sam Reynolds, Research Lead for LNG/Gas in Asia, emphasized that renewable energy offers a strategic hedge against commodity market volatility. According to public reports, President Trump threatened to destroy Iran's electric plants, oil wells, and Kharg Island if the Strait of Hormuz is not reopened, highlighting the geopolitical risks that could prolong the crisis.