FGV estimates conflict could add nearly 4 percentage points to sector index, pushing it close to 10% in 2026
The war in the Middle East involving the United States, Israel, and Iran is already pushing up construction costs in Brazil. That could raise the National Construction Cost Index (INCC) by 3.89 percentage points in 2026, bringing the indicator to 9.72% this year, according to Ibre-FGV.
Initially, the scale of the impact depended on the duration of the conflict and the intensity of its effects on global supply chains. In practice, however, the shock has been strong enough to make cost pass-through unavoidable, with increases already appearing in the sector, the study notes. The analysis was conducted by economists Ana Maria Castelo, André Braz, and Matheus Dias.
Prices for materials, transportation, and petrochemical inputs are rising. The survey, which consulted industrial input manufacturers for construction, identified widespread price adjustments between February and March, taking effect in April, with further increases expected in May.
According to the economists, the war is also shifting the main cost driver in construction. “Until recently, cost dynamics were largely explained by labor, but the current scenario puts materials back at the center of sector inflation, increasing the risk of INCC index acceleration in the short and medium term,” they said.
The increase could also affect government housing programs such as My Home, My Life and Casa Brasil, said economist Ana Maria Castelo. The reason is the rise in unforeseen costs in projects with fixed contracts and pricing, which could create losses for construction companies.
In the non-metallic minerals group, which includes cement- and concrete-based products, the impact is estimated at around 1.34 percentage points on the index. With limited substitution options—especially in infrastructure projects—cost pass-through is more likely, reducing companies’ ability to absorb increases. The sector is also heavily dependent on diesel and petroleum products used as additives and coke in production and transportation.
Plastic materials and PVC products are also among the most sensitive, given their petrochemical base. Inputs such as polyethylene and PVC resins are directly linked to oil and gas supply chains, increasing exposure to international volatility.
Even before the conflict, these products had already posted significant price increases, such as PVC pipes, which rose 16.29% over the 12 months through February. With the war, price adjustments could reach 35%, particularly for pipes and fittings. The impact on the INCC could reach up to 1.11 percentage points.
Paints and chemical products have an estimated potential impact of 0.31 percentage points on the INCC. As these materials are used in the final stages of construction, the effect tends to be lagged, affecting projects already underway. The increases are driven by higher costs of petrochemical inputs such as solvents and resins, as well as rising logistics costs. Projected adjustments are around 10%.
In metals, the potential impact is estimated at 0.96 percentage points. Steel rebar and wire are the main drivers, with projected price increases of 13%. These products account for 5.30% of the index.
According to the study, this segment behaves differently from others, as prices are more closely tied to China’s industrial dynamics and global demand. In this case, the conflict acts more as an “amplifying factor” rather than the primary cause.
In the finishing segment, ceramic tiles are expected to see price increases of 12%, with an estimated impact of 0.17 percentage points on the INCC. Ceramic production relies on natural gas in kilns, making the sector sensitive to energy shocks.
Additionally, some inputs used in enamels and pigments depend on global supply chains affected by recent instability. Even with a smaller direct impact, price increases tend to spread throughout the value chain due to the widespread use of these materials.
The São Paulo state construction industry association (Sinduscon-SP) is already observing rising material costs, according to its president, Yorki Estefan. He noted that the increase was reflected in the April INCC, released Monday (27), which rose 1.04% after a 0.36% increase in March.
Estefan said the impact is likely to be stronger on inputs with greater exposure to international markets. For construction companies, the immediate effect is higher project costs and additional pressure on margins, especially in long-term contracts. Depending on how long the scenario persists, companies may revise timelines, delay project launches, and become more selective in investments.
“In the case of the My Home My Life housing program, the impact is likely to be more pronounced. Because it operates with tighter margins and predefined parameters, rising costs may affect the economic viability of new projects and slow production. That could require operational adjustments and possibly program refinements to preserve delivery capacity,” Estefan said.
*By Grace Vasconcelos — São Paulo
Source: Valor International
https://valorinternational.globo.com/