Construction costs jump 4.4% amid US-Iran war

Rising construction costs, driven in part by global supply chain issues caused by the US-Iran war, are leaving many homeowners at risk of underinsurance should their property face damage or destruction.

This is according to property and development broker Karis Insurance, which today (2 July 2026) published research showing that average construction costs have risen by 4.4% in the past three months, despite inflationary pressures easing in other markets.

Indeed, the cost of prefabricated steel alone has risen by 11% since the outbreak of tensions in the Middle East.

Ravi Sejpal, director of insurance at Karis Insurance, said that amid rising construction costs, the “risk of underinsurance has already grown and the problem is likely to worsen over time”.

The recent rises mark just the latest uptick in an ongoing period of construction cost growth, with the cost of repairs having increased by 32% over the previous five years.

The rises, Sejpal added, mean that a house valued at £1m in 2021 may be underinsured by a dramatic £320,000 today.

Proportional remedy

As previously reported by Insurance Times, property underinsurance leaves homeowners exposed to proportional remedy clauses, meaning payouts can be reduced even if the cost of repair is less than the policy’s limit.

Sejpal concluded: “Many property owners are understandably looking for ways to control rising costs. However, failing to keep insurance cover in line with surging rebuild costs is an increasingly risky way of trying to save money.

“If a fire or catastrophic event destroys your property it is already a traumatic experience. Being underinsured and owing hundreds of thousands of pounds on top of losing your property would prove a devastating blow.”