According to Aon Head of Construction and Infrastructure for Asia, Mr Vincent Banton, while most construction activity in Asia sits far from the physical geography of the conflict, the industry is highly exposed to its indirect effects.
For instance, Mr Banton pointed out that energy volatility, supply chain disruption, logistics risk and uncertainty around insurability and project delivery are converging to reshape construction risk profiles across the region.
Supply chain disruptions linked to project delivery risk
Construction supply chains are particularly sensitive to geopolitical instability because they rely on a complex network of global suppliers, transport routes and specialist contractors, said Mr Banton.
“Disruption often emerges first through logistics rather than physical damage,” he said.
“Heightened risk across key maritime corridors serving the Middle East has increased rerouting, extended transit times and raised freight and insurance costs for goods moving into Asia.”
As such, he highlighted several consequences for construction projects in Asia.
“Longer lead times for critical materials such as steel, cement, aluminium, glass and mechanical components increase the likelihood of schedule slippage, especially for projects operating on just-in-time delivery models,” he said.
“Even where materials remain available, volatility in transport timing and cost complicates procurement planning and weakens certainty around delivery milestones.”
He added, “This creates greater exposure to delay claims, liquidated damages and contractual friction between owners, contractors and subcontractors.”
He also explained that supply chain stress “does not always appear as outright shortages”. For instance, he noted insights from his company emphasised that financial strain further down the value chain can surface earlier, as contractors and suppliers absorb rising costs or face cash-flow pressure.
“This can increase counterparty risk, disrupt labour availability and slow progress on multi-tiered construction programmes before disruptions become visible on site,” he added.
Energy volatility, a core risk driver
According to Mr Banton, energy volatility “is considered one of the most significant transmission channels linking geopolitical conflict to construction risk in Asia”.
“The Middle East plays a central role in global oil and liquefied natural gas flows, and disruptions in the region have heightened price volatility rather than simply pushing prices in one direction,” he explained. “For construction, this matters because energy costs are embedded throughout the project lifecycle.”
Elaborating, he pointed out that higher and more volatile energy prices “increase the cost of producing energy-intensive construction materials and raise transport and site-operation expenses”.
“This creates uncertainty around cost forecasting, erodes margins under fixed-price contracts and challenges traditional assumptions about escalation and contingencies,” said Mr Banton.
Long-term implications
Looking beyond near-term disruption, Mr Banton indicated that the Middle East conflict could be “considered as part of a broader shift toward a more volatile, geopolitically complex operating environment”.
For the construction industry in Asia, he listed several long-term implications:
- Geopolitical risk is becoming structural rather than episodic. Construction organisations can no longer treat geopolitical disruption as a low-probability event managed through generic force-majeure clauses. Instead, it is increasingly influencing project feasibility, financing decisions and insurability, particularly for large infrastructure and cross-border projects.
- Traditional risk allocation models are under strain. Fixed-price contracts and aggressive risk transfer down the supply chain leave limited flexibility when disruption persists rather than resolves quickly. Aon’s construction risk insights suggest that prolonged volatility increases the likelihood of disputes, renegotiations and claims, especially where risk-sharing mechanisms are misaligned with today’s operating realities.
- Insurers and capital providers are paying closer attention to accumulation risk, geographic exposure and dependency on constrained supply corridors. This may influence the pricing, structure and availability of construction-related insurance programmes over time, reinforcing the importance of early, informed risk dialogue.
Mitigating the risks
“Businesses must consider proactive risk management rather than reactive response going forward,” said Mr Banton.
Firstly, he said supply chain visibility and stress testing “should be a priority”.
“Understanding where materials, components and services are sourced, and identifying single-point dependencies or financially vulnerable counterparties, allows organisations to make informed decisions around diversification, inventory buffers and procurement sequencing,” he said.
Secondly, he noted insurance and risk financing strategies should also be reviewed to ensure they reflected evolving exposures.
“This includes understanding how construction all risks, marine, delay-related exposures, political violence and credit risks interact under current programmes, and where gaps may emerge in prolonged disruption scenarios,” explained Mr Banton.
Thirdly, he emphasised the importance of contractual resilience, saying, “Clear escalation mechanisms, realistic contingency planning and transparent communication between owners, contractors and suppliers can reduce friction when volatility persists.”
Finally, he said energy and operational resilience “are becoming strategic considerations for the construction sector”.
Mr Banton said, “Integrating energy price sensitivity, logistics disruption scenarios and workforce planning into project governance enables organisations to move from crisis response to resilience-by-design.”
Singapore: Construction sector risks
Touching on Singapore’s construction sector, Mr Banton said the Middle East conflict presents a concentrated set of risks driven by energy volatility, supply chain sensitivity and project execution pressure.
“As an import-dependent market, Singapore relies heavily on global energy and material flows, making construction costs particularly exposed to geopolitical disruption affecting oil, gas, shipping and insurance markets,” he said. “This exposure is less about physical interruption and more about volatility and uncertainty entering project economics.”
Supply chain disruption
According to Mr Banton, supply chain disruption is emerging as a key risk, as heightened insecurity across Middle East-linked maritime corridors “has increased freight costs, transit times and insurance premiums”.
“For Singapore projects operating on tight schedules and just-in-time delivery models, delays in materials such as steel, aluminium and specialist equipment can quickly disrupt critical paths, increasing the risk of claims, liquidated damages and contractual tension between owners and contractors,” he said.
Energy volatility
Mr Banton also mentioned that energy volatility “is amplifying these pressures”.
“Rising and unpredictable fuel and power costs feed directly into material production, logistics and site operations, eroding margins under fixed-price contracts and complicating cost forecasting,” he said.
Over the longer term, Mr Banton said Singapore firms “will need to reassess how energy risk, supply chain resilience and insurance strategy are integrated into project planning”.
“Proactive stress-testing, clearer risk allocation and aligned risk transfer will be essential to sustaining project delivery in a more geopolitically volatile environment,” he added.