US-Iran ceasefire pushes down oil prices but construction costs to stay high for now

Jun 22, 2026, 09:32 am

International crude oil prices are rapidly declining following the signing of a ceasefire Memorandum of Understanding (MOU) between the United States and Iran, but the consensus within the construction industry indicates that the upward trend in construction costs will persist for the time being. This is because there is a time lag before falling oil prices are reflected in the costs of construction materials and project expenditures, and it is rare for raw material prices that have already surged to revert to past levels.

According to the Korea National Oil Corporation on the 21st, the price of Dubai crude dropped 25.0% from 97.41 dollars per barrel on the 3rd of this month to 73.09 dollars on the 18th. Over the same period, Brent crude and West Texas Intermediate (WTI) fell by 18.4% and 20.2%, respectively.

Oil prices exert a direct influence not only on fuel costs for construction equipment but also on petrochemical-based construction materials such as asphalt, asphalt concrete, waterproofing materials, and paint. Amid disruptions in the supply and demand of crude oil and raw materials caused by the conflict in the Middle East, construction costs have maintained an upward trajectory into this year.

According to the Korea Institute of Civil Engineering and Building Technology, the construction cost index for April stood at 136.88, up 4.44% from the same month last year. The index, which was at 132.7 in December last year, has risen steadily this year, registering 133.52 in January, 133.76 in February, 134.53 in March, and 136.88 in April. The construction cost index measures price fluctuations in direct construction costs—including materials, labor, and equipment—with 2020 as the base year (100).

In particular, a 28.8% year-on-year increase in the prices of asphalt concrete and asphalt products acted as a major factor driving up the construction cost index in April this year.

Prices for the raw ingredients of construction materials also spiked significantly. According to the Producer Price Index from the Bank of Korea, the prices of basic chemical substances rose 42.0% in May compared to the same month last year, while synthetic resins and synthetic rubber climbed 36.6%. Basic chemical substances serve as raw ingredients for waterproofing materials, paint, and insulation, whereas synthetic resins and synthetic rubber are utilized in manufacturing construction materials such as piping, window frames, and wire coatings.

The industry views that time is required before the effects of lower oil prices manifest at actual construction sites.

Jeon Won-jun

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