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Alternate Scenarios - 2026 Spring: U.S. Construction, Cement & Concrete Outlook

How the Iran conflict reshapes inflation, interest rates, and construction recovery

Geopolitical Economic Impact on Construction, Cement and Concrete
Geopolitical Economic Impact on Construction, Cement and Concrete

All forecasts contain risk. Risks can originate from the data used, the process of calculations, the assumptions, or a combination of each element. Indeed, an infinite number of alternative scenarios to the Baseline exist. Each scenario can emerge even small changes in assumptions.

 

While forecast risks were high entering 2026, they have been elevated by the Iran conflict. Prior to the conflict risks centered on assessments regarding underlying strength of the economy and the headwinds that face the near-term economy. Those assessments included:

 

  • The strength and resiliency of consumer spending.

  • The rate of improvement in inflation in light of administration policies.

  • The strength of labor markets.

  • Federal Reserve monetary policy actions.

 

Even in the context of these risks a recovery in construction spending was expected to materialize in the second half of the year – ending a three-year slide in US cement consumption.

 

While those risks remain, the central risk to the forecast now centers on the economic impacts of the Iran conflict. The adverse impacts are driven by the price of oil and its influence on inflation and consumer spending. To this end, three scenarios have been sketched including an Optimistic, Pessimistic, and Baseline scenario. Each one varies based upon the length of the conflict and shipping blockage through the Strait of Hormuz.

 

Each of these scenarios hold timing risks for monetary policy easing. The easing in monetary policy, combined with inflation conditions, play a key role determining the timing and degree of interest rate declines. Lower interest rates remain the key cog to ushering in a construction recovery.

Assignment of Probabilities


Critically important to our guidance is the assignment of probability to each scenario. To this end, a rough estimate is provided as to the likelihood each scenario materializes and when the conflict will end.

 

  • The Optimistic scenario is valid if the war and the shipping disruption end very soon.


  • The Baseline scenario is valid if the administration has an exit plan that limits the disruption to only two or three months.


  • The Pessimistic scenario is valid if the conflict lasts longer than that.

 

Increasingly, it seems that the administration does not have a clear plan for solving the shipping crisis or an exit strategy for the conflict. As a result, we assign a 50% probability of occurrence to the Baseline Scenario, 40% to the Pessimistic Scenario, and only 10% to the optimistic scenario. 


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