(Photo: Luka Cerovina/arhiva DOMinvest)
ZAGREB, 20 April 2026 – Growing geopolitical instability, particularly the risk of escalation involving Iran and further disruption to the Strait of Hormuz, could significantly affect Croatia’s construction sector, experts warn.
Around 20% of the world’s oil and liquefied natural gas (LNG) passes through the Strait of Hormuz, making it one of the most critical energy chokepoints globally.
Any disruption would likely trigger a sharp rise in energy prices, with direct consequences for construction costs across Europe, including Croatia.
Saša Perko, a civil engineer and industry expert, explains that the production of key construction materials is highly energy-intensive. Processes such as cement production and steel manufacturing rely heavily on fuel and electricity, meaning any increase in energy costs quickly translates into higher material prices.
Steel prices in Europe have already begun to climb in line with oil prices, while cement production remains particularly vulnerable due to the high energy demands of clinker production.
(Photo: Luka Cerovina/arhiva DOMinvest)
While Croatia sources basic materials such as cement and bricks largely from within Europe, challenges arise with specialised equipment and components imported from Asia. Increased shipping risks and higher maritime insurance costs are pushing up prices and causing delivery delays.
These additional costs are typically passed on through the supply chain, ultimately affecting investors and end buyers. Some companies are responding by stockpiling essential materials to avoid disruptions.
Materials directly tied to oil derivatives, including asphalt and waterproofing products, are especially sensitive to rising oil prices. When oil approaches or exceeds $100 per barrel, costs for these materials can increase sharply.
This creates particular difficulties for fixed-price construction contracts, where contractors may struggle to absorb sudden cost increases, potentially eroding already tight profit margins.
(Photo: Luka Cerovina/arhiva DOMinvest)
Broader economic effects are also expected. Rising energy prices tend to fuel inflation, which can halt or reverse the recent trend of falling interest rates. This would make borrowing more expensive and reduce access to financing for new construction projects.
As a result, new developments may slow, with only financially robust projects moving forward under stricter lending conditions.
Although property is often viewed as a safe investment during times of uncertainty, Perko notes that Croatia’s housing market is still largely driven by domestic demand, tourism, and limited supply.
Saša Perko (Photo: Dejan Tatomir)
In addition to materials, labour costs are expected to increase. Higher fuel prices contribute to rising living costs, prompting construction firms to raise wages in order to retain workers in a sector already facing labour shortages.
Labour typically accounts for 35–45% of total construction costs. However, wage increases tend to lag behind material cost increases by six to twelve months, meaning the immediate impact on property prices is usually driven by materials first.
While crises can accelerate discussions around sustainability and local sourcing, a rapid transition is unlikely. The immediate priority for the industry remains cost stabilisation, as sustainable materials often come with higher upfront costs.
The extent of price increases in Croatia’s housing market will largely depend on how long any disruption lasts. A prolonged crisis could mirror the period following the war in Ukraine, when residential property prices in Croatia rose sharply, by an estimated 60% over four years.
For now, the sector remains on alert, closely watching global developments that could reshape costs, timelines, and investment decisions.