Geopolitical events can raise construction costs, delay deliveries and make some sourcing, transport or payment arrangements unlawful. Whether a contractor can recover more money, obtain an extension of time or suspend work depends on the contract, governing law, project facts and applicable procurement rules—not on the event alone.
How geopolitical risks reach a construction project
A disruption may begin far upstream from the jobsite: a trade measure changes an input’s price, a supplier loses access to a component, a shipping route changes, or an insurer revises its terms. The effects then pass through a chain that can include overseas sellers, forwarders, carriers, charter arrangements, bills of lading, suppliers and subcontractors before reaching the main contractor.
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That chain matters because the construction contract and the transport or supply contracts are separate agreements. A contractor may still owe the project owner a delivery milestone even when the delay originates with a carrier or supplier outside the contractor’s control. The allocation of risk depends on the actual contract documents, not simply on where the disruption began. Hill Dickinson discusses the shipping–construction contract interface.
Common routes of impact
- Price: Tariffs, duties, freight, fuel, insurance, currency movements and material-price changes can increase the cost of inputs.
- Availability and time: Supplier disruption, longer lead times, freight rerouting or unavailable materials can affect procurement and critical-path activities.
- Lawful performance: Sanctions, export controls and procurement restrictions can limit counterparties, goods, destinations, services or payment channels.
- Insurance and financing: Changed risk conditions can affect insurance costs and, in some markets, liquidity or payment continuity.
- Disputes: The parties may disagree over extensions of time, price adjustment, mitigation, suspension, termination or damages.
Why the exposure matters—and what the figures show
Recent industry and legal reporting indicates that geopolitical disruption is a material commercial concern, but the figures describe different populations and should not be treated as a single construction-industry measurement.
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| Reported figure | What it measures and its limits |
|---|---|
| 25%–30% effective tariff rate for construction goods in 2025, described as a 40-year high | Deloitte’s 2026 outlook reports this figure and separately says steel and aluminum tariffs reached up to 50%. These are distinct claims; applicable tariff treatment can change. |
| Almost 4,300 supplier notices of tariff impacts since January 20, 2025 | The Associated General Contractors of America’s Q2 2025 Market Conditions Report says the notices involved costs or longer lead times. This is AGC’s account of notices received, not a census of the construction industry. |
| 79% cited tariffs, sanctions and export controls as primary external drivers of disputes; 78% cited operational and supply-chain disruption; 82% feared cross-border or multi-agency investigations | These are findings from the Global Disputes Forecast as reported in Baker McKenzie’s 2026 article. They are not construction-only survey results. |
| Nearly half of E&C executives described their supply chains as fragile due to geopolitical tensions | This is an Autodesk survey finding reported through Deloitte’s 2026 outlook, not an independently verified count of the whole industry. |
| Insurance premiums in Saudi Arabia had risen 30%–50% | HKA’s 2026 discussion attributes this regional observation to Dr Mohamed Anees. It is expert commentary, not a universal market measure. |
Who bears extra costs or delay?
Start with the wording that allocates price, time and disruption risk. A geopolitical event does not automatically entitle a contractor to a price increase or more time. A fixed-price arrangement may leave tariff-related increases with the contractor unless another clause provides relief. A general change-in-law clause should not be assumed to cover every tariff or supplier-cost increase; its wording and the law governing it matter. Deloitte reports that builders have been adding tariff-adjustment clauses and describes indexed pricing as one response.
Price mechanisms to distinguish
- Fixed price: Gives the owner greater price predictability, but can leave the contractor carrying covered input increases if no adjustment mechanism applies.
- Price adjustment or indexation: Can share defined movements in specified inputs. The clause needs a baseline, a named benchmark or formula, proof requirements, notice rules, caps or sharing terms, and a way to handle decreases.
- Reimbursable or change-based payment: The contract’s defined eligible costs and approval procedures determine what can be recovered; the label alone does not establish coverage for every disruption-related expense.
For a workable adjustment clause, identify the covered costs—such as particular tariffs, duties, freight, fuel, insurance or material indices—and specify the baseline date, supporting records, audit rights, notice and caps or sharing formula. State whether reductions are passed through as well as increases. Those details reduce the risk that the parties later disagree over what changed and how the adjustment is calculated.
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Time relief and force majeure
Force majeure and hardship are not interchangeable protections, and neither operates automatically. Check the actual trigger, exclusions and causation test: does the clause address war, blockade, governmental action, embargoes, transport interruption or sanctions, and must an event prevent performance or merely hinder it? Consider whether reasonable alternatives were available, what mitigation was required, how concurrency is treated, and whether a long-stop termination right applies. Higher cost alone may not meet a force-majeure test. Baker McKenzie discusses the effect of clause wording and applicable law on these disputes.
Shipping terms can shift risk without removing downstream obligations
Purchase terms, Incoterms, transport insurance, bills of lading and construction milestones should be reviewed together. Under FOB, the buyer contracts with the carrier and directly bears freight increases. Under CIF, the seller arranges carriage and insurance, but the buyer can still face downstream delay and terms incorporated from the carriage documents. A short Incoterms label is not a substitute for checking the actual sale and transport agreements. Hill Dickinson explains these shipping interfaces.
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Hill Dickinson’s 26 March 2026 discussion identifies structural steel, copper, tiles, cladding, and mechanical and electrical equipment among UK construction inputs that can be affected by Red Sea and Strait of Hormuz disruption. It also emphasizes that delivery obligations downstream may remain even if the initial transport problem is outside a contractor’s control. Route status is time-sensitive and should not be inferred from that article as a current condition.
What to review before a disruption—and what to do when one occurs
Review the contract and procurement position
- Price: Identify whether the contract is fixed-price, adjustable, indexed, reimbursable or subject to a change mechanism. Check what costs qualify, the evidence and notice rules, any caps, sharing provisions and audit rights.
- Time: Read the force-majeure trigger, exclusions, causation standard, mitigation duty, extension-of-time route, concurrency treatment and any long-stop termination provision.
- Notice: Map each deadline, required recipient, delivery method, required particulars and update obligation. Follow the contract’s procedure and consider protective notices where appropriate on counsel’s advice.
- Procurement and origin: Check domestic-content, trade-agreement, security-of-supply and national-security requirements before changing a supplier or material.
- Sanctions and export controls: Screen relevant counterparties, goods, destinations, services and payment channels against the rules that apply to the project. Provide for cooperation, information, suspension, substitute performance and termination if lawful performance becomes restricted.
- Shipping: Align purchase terms, Incoterms, transport insurance, bills of lading and project delivery milestones.
Keep a contemporaneous record
Preserve supplier notices, carrier and shipping advisories, route changes, insurer and premium notices, orders, price quotes, cost records and procurement decisions. Record alternatives considered, their availability and lead times, mitigation attempts, and the resulting effect on the programme and critical path. Send required notices in the form and timeframe the contract specifies; keep records that connect the event to the claimed cost or delay. Baker McKenzie highlights notice and evidence discipline as important to managing disputes.
Compare responses rather than assuming one will solve the problem
| Response | Potential benefit | Trade-offs to assess |
|---|---|---|
| Price adjustment instead of fixed-price allocation | Shares defined cost movements and can make the allocation more explicit. | Requires a clear baseline, formula, evidence and process; the parties must decide how increases and decreases are treated. |
| Diversified suppliers instead of a single source | May offer another procurement route if a supplier is disrupted. | Alternative suppliers may require qualification, technical approval and compliance checks, and may not have immediate capacity. |
| Substitution, stockpiling or rerouting | May preserve supply or reduce exposure to a particular route or source. | Consider technical approval, availability, storage cost, compliance and schedule effect before committing. |
Deloitte describes these approaches as strategies firms are considering; they are not guaranteed solutions. Their suitability depends on the project, approvals, actual supply options and contract terms.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Procurement and sanctions rules depend on jurisdiction
Contractual flexibility to change suppliers does not override public procurement restrictions, sanctions or export controls. The following sources address different regimes and scopes; none is a global rulebook.
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- United States federal procurement: FAR Part 25 addresses foreign construction materials and provides procedures for exceptions and consequences of unauthorized use. Confirm the applicable procurement requirements and contract terms before making a sourcing change.
- UK central government: Cabinet Office PPN 025 applies to central government departments, their executive agencies and non-departmental public bodies for relevant procurements in scope. It directs in-scope bodies to identify relevant procurements, engage sector leads early and use the national-security exemption where justified; it should not be generalized to every UK project.
- European Union: The European Commission page, updated 24 August 2026, provides FAQs on an infrastructure transaction ban under Article 5ae of Regulation 833/2014. It is not a substitute for checking the operative regulation and the particular transaction.
Identify which legal regime and contract version govern the project, then verify the operative official text and the specific transaction. A supplier substitution that is commercially feasible may still be impermissible under applicable rules.
Impacts vary by market and project
Regional observations should not be treated as universal outcomes. HKA’s discussion describes Saudi projects as facing logistics, pricing, delay, cost-escalation and insurance concerns, and parts of Africa as facing currency, local-content, regulatory, liquidity, payment-continuity and force-majeure concerns. These are observations from the named contributors, not findings that every project in those markets faces the same risks. HKA’s 12 June 2026 discussion quotes Khushboo Shahdadpuri, a Partner at Al Tamimi & Company focused on construction, infrastructure and energy disputes: “It’s really a whole new world with a lot of nuances, and we need to be mindful of how we manoeuvre through those challenges.”
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