According to The Sullivan Report's newly released Alternative Scenarios - Spring 2026: US Construction and Cement Outlook, what had been shaping up as a gradual construction rebound in 2026 is now increasingly unlikely.
“The U.S. economic and construction outlook has been materially downgraded as the Iran conflict presents the central risk to more somber expectations for inflation, interest rates, consumer spending, and overall economic growth. These conditions will push back the anticipated recovery across construction and cement markets,” said Ed Sullivan, Chief Economist at The Sullivan Report.
“After three years of decline, the year offered hope of a modest recovery for construction and cement consumption volume. The enduring Iran conflict and its impact on oil prices and inflation has minimally postponed that recovery to 2027. At worst, it could result in an economy-wide recession and a significant reduction in already depressed construction and cement consumption activity," said Sullivan. “The path to recovery is no longer purely cyclical. It is now heavily influenced by geopolitical developments.”
Oil, Inflation and Interest Rates Drive the Outlook
The report outlines three alternative scenarios - Optimistic, Baseline and Pessimistic - based on the duration of the conflict and the severity of US and global energy supply disruptions -
* Baseline Scenario (50% probability): Limited disruption lasting two to three months. Oil prices rise modestly before stabilising. Inflation remains elevated and interest rate cuts are delayed until late 2026. Construction activity remains subdued, with cement consumption stabilizing but showing limited growth.
* Pessimistic Scenario (40% probability): Prolonged disruption of six months or more. Oil prices surge to USD 140–150 per barrel, fueling inflation above 4% and raising recession risks. Interest rates remain elevated, credit conditions tighten, and both residential and nonresidential construction decline further. Cement consumption weakens into 2027.
* Optimistic Scenario (10% probability): Rapid de-escalation with minimal disruption. Oil prices retreat quickly, inflation moderates, and the Federal Reserve begins easing policy by mid-2026. Lower interest rates support a rebound in construction and cement demand beginning in late 2026 and strengthening into 2027.
“The longer the shipping is curtailed through the Strait of Hormuz, the higher oil prices and inflation remains elevated. That means interest rates stay higher for longer. Combined these factors work against consumer spending, business hiring, a recovery in homebuilding and a slowdown in a nonresidential recovery. In this context, a 2026 recession cannot be ruled out.” Sullivan noted.
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