Recently, my HKA colleague Daniel Jackson published an excellent article on the impacts of the current conflict in the Middle East on construction projects in that region. I strongly urge you to read his article, available here.

However, in this article, I examine how these impacts may influence construction and infrastructure projects throughout the Asia–Pacific (APAC) region.

INTRODUCTION AND OVERVIEW

While the impacts of the current conflict in the Middle East on construction and infrastructure projects in that region are direct and immediate, for projects across the APAC region, the consequences are more diffuse, indirect, and often underestimated. These impacts arise not only from physical disruptions to energy supply and logistics, but also from market volatility, geopolitical realignment, regulatory responses, and behavioural reactions by governments, employers, insurers, financiers, and supply chains.

For APAC projects, which span developed and emerging economies, diverse legal systems, and a wide range of procurement and contracting practices, the challenge is not merely whether the conflict qualifies as force majeure / exceptional events, but how its secondary and tertiary effects translate into delay, disruption, cost escalation, and risk reallocation. These impacts will be experienced differently by contractors and owners, including government employers, and will be shaped by local law, bespoke contract drafting, cultural approaches to risk, and the maturity of dispute resolution mechanisms.

This article adopts a practical, APAC‑focused perspective, as to the wider regional implications, contractual remedies, and mitigation strategies relevant to projects across East Asia, Southeast Asia, South Asia, and Australasia.

How the Iran conflict translates into APAC project impacts

While APAC projects may be geographically distant from Iran, several transmission mechanisms create real and measurable project risk.

A. Energy and input cost volatility

The conflict has heightened volatility in global oil, gas, and refined product markets. For APAC construction projects, this manifests through:

• Increased fuel and power costs affecting site operations, logistics, and off‑site fabrication.
• Escalation in prices for energy‑intensive materials such as steel, cement, aluminium, glass, and bitumen.
• Uncertainty in energy supply security for countries heavily reliant on imported hydrocarbons.

In jurisdictions where energy pricing is partially regulated or subsidised, governments may intervene abruptly, altering tariffs, restricting supply, or reprioritising domestic consumption—creating downstream effects on construction programmes.

B. Supply chain disruption and rerouting

Even without direct disruption in APAC ports, global shipping networks react defensively to Middle East instability:

• Rerouting of vessels away from high‑risk areas increases transit times and freight costs.
• Insurers may impose additional war‑risk premiums or withdraw cover, affecting shipping availability.
• Congestion increases at alternative ports, delaying critical materials and long‑lead equipment.

For APAC EPC projects reliant on equipment manufactured in Europe, the Middle East, or North America, these delays can quickly affect critical path activities.

C. Financial market and currency effects

Conflict‑driven uncertainty often leads to:

• Currency volatility, particularly in emerging APAC economies.
• Higher borrowing costs as lenders price geopolitical risk into project finance.
• Increased scrutiny by export credit agencies and multilateral lenders.

These factors directly affect projects with foreign‑currency exposure, imported equipment, or tight financing covenants.

D. Regulatory and government responses

Governments across APAC may respond to global instability through:

• Trade restrictions, export controls, or sanctions compliance measures.
• Changes to customs procedures, inspections, or licensing regimes.
• Reprioritisation of public spending toward defence, energy security, or social stability.

For government‑led infrastructure programmes, this may result in funding delays, scope changes, or suspension of works for policy reasons unrelated to project performance.

Contractor impacts in the APAC context

A. Delay and disruption without physical damage

APAC contractors are more likely to experience indirect delay and disruption rather than direct damage. Common scenarios include:

• Late delivery of imported materials and specialist equipment.
• Reduced productivity due to resequencing, out‑of‑sequence work, or inefficient resource deployment.
• Workforce availability issues where expatriate labour mobility is affected by airline, visa, or security changes.

In more extreme circumstances – such as fuel shortages impacting construction projects, contractors me experience:

• Suspension of works.
• Partial or total demobilisation.

Proving entitlement in such cases is evidentially demanding, particularly where contracts require demonstration of direct causation and critical‑path impact.

B. Cost exposure under non‑compensable relief regimes

Many standard forms used in APAC (often heavily amended) grant extension of time for force majeure‑type events but exclude cost recovery. Contractors therefore face:

• Prolongation costs that cannot be recovered through conventional claims.
• Escalation risk where price‑adjustment mechanisms are absent or capped.
• Margin erosion due to fixed‑price or lump‑sum risk allocation.

This risk is amplified on projects procured through competitive public tenders where aggressive pricing assumptions were made.

C. Subcontract and supply chain pass‑through risk

APAC projects often involve complex, multi‑tier subcontracting structures across borders. Contractors may face:

• Subcontractor claims not fully recoverable upstream.
• Insolvency risk among smaller suppliers affected by cash‑flow stress.
• Misalignment between main‑contract relief and subcontract entitlements.

Managing this risk requires early contractual alignment and disciplined claims management.

Owner and government perspectives

A. Public owners and sovereign risk considerations

For government employers, the conflict introduces competing priorities:

• Balancing fiscal discipline against the need to maintain strategic infrastructure delivery.
• Managing public accountability where cost increases or delays attract scrutiny.
• Responding to social and political pressures arising from energy or cost‑of‑living impacts.

Governments may exercise contractual rights to suspend, vary, or re‑scope projects for public‑interest reasons, raising questions of compensation and risk allocation.

B. Private owners and sponsors

Private developers and sponsors must manage:

• Funding constraints and lender consent requirements.
• Programme reprioritisation across portfolios.
• Increased sensitivity to completion risk and liquidated damages exposure.

Owners may resist claims aggressively, particularly where impacts are perceived as part of global market risk rather than project‑specific events.

Contractual remedies across diverse APAC frameworks

Given the prevalence of bespoke contracts in APAC, entitlement analysis must be contract‑specific. However, common potential relief mechanisms include:

• Force Majeure / Exceptional events: Often limited to time relief; foreseeability and notice compliance are critical.
• Change in law: Relevant where sanctions, trade controls, or regulatory changes directly affect performance.
• Suspension and employer risk: Particularly where government actions prevent or delay works.
• Price adjustment and escalation clauses: Where included, these may partially mitigate cost volatility.
• Termination for prolonged events: A last‑resort mechanism carrying significant commercial consequences.

Local law overlays such as civil‑law hardship doctrines, statutory frustration, or good‑faith obligations, may materially affect outcomes and should not be overlooked.

Mitigation and strategic responses

A. Early Contractual and Legal Assessment

In tandem with obtaining qualified legal advices, Parties should promptly:

• Map conflict‑related impacts to specific contractual provisions.
• Issue protective notices without prejudicing future claims.
• Assess local‑law remedies alongside contractual rights.

B. Programme and Procurement Adaptation

Mitigation may include:

• Resequencing works to prioritise unaffected activities.
• Diversifying suppliers and logistics routes where feasible.
• Accelerating procurement of long‑lead items.

C. Cost and Evidence Discipline

Given the likelihood of contested claims, contemporaneous records are essential:

• Programme updates demonstrating causal impact.
• Detailed cost segregation between base and impact‑related expenditure.
• Clear linkage between global events and project‑specific consequences.

D. Commercial and Cultural Sensitivity

Across APAC, approaches to negotiation, claims, and dispute resolution vary widely. Successful mitigation strategies account for:

• Local negotiation norms and relationship‑based contracting cultures.
• The maturity of adjudication, arbitration, or litigation mechanisms.
• Reputational considerations, particularly on government projects.

Role of expert support

In an environment where causation is indirect and impacts are multi‑factorial, early expert input can assist parties to:

• Isolate the effect of geopolitical events from baseline project risk.
• Develop defensible delay and disruption analyses.
• Quantify cost impacts consistent with contractual and legal requirements.
• Support negotiated outcomes before positions harden into disputes.

CONCLUSION

The war involving Iran is not merely a Middle East risk; it is a global stressor with tangible consequences for construction projects across the APAC region. For contractors, owners, and governments alike, the challenge lies in recognising how indirect impacts translate into contractual risk, and in responding with speed, discipline, and cultural awareness.

In a region characterised by legal diversity, bespoke contracts, and complex stakeholder environments, entitlement will rarely be automatic. Those who combine early contractual action, rigorous evidence management, and pragmatic mitigation strategies will be best placed to preserve value and manage exposure in an increasingly uncertain geopolitical landscape.

About the author

Stephen Rae is a Chartered Quantity Surveyor with over 40 years of experience in the construction and engineering industries. He specializes in quantum and delay and has been appointed as an expert witness on over 70 occasions. Stephen has given more than 50 hours of expert testimony in international and domestic arbitration (including at the ICC and SIAC), litigation, and conciliation in jurisdictions across Australia, Hong Kong, Philippines, Singapore, and Taiwan.