Posted by So, the world has entered yet another period of profound economic turbulence. The last time I wrote about Supply and Demand it was off the back of Covid, this time, it’s driven by war.
The US/Israeli conflict with Iran has already reshaped global energy markets, disrupted shipping lanes, and sent shockwaves through property and construction sectors worldwide.
This week, I want to walk you through the basics of supply and demand: what they are, how they interact, and why shocks like a pandemic or a war in the Middle East ripple so quickly through something as local as your supermarket, your forecourt, or your property search. I’ll use some of the same examples I drew on last time, because the mechanics haven’t changed, only the trigger.
Whether you’re a first-time buyer, a seasoned investor, or just someone trying to make sense of rising fuel prices, understanding these fundamentals will help you cut through the noise and make better decisions.
But to understand what’s happening now, it helps to revisit the economics lessons the post-Covid era taught us.
A post-Covid recap
Cast your mind back to March 2020. Uncertainty in the face of Covid-19 led people to save more and spend less, because there just wasn’t much to spend on. Unless you were buying on Amazon, you most likely weren’t buying much at all.
Cut to 18 months later, and the world had reopened. People had been cautiously saving for the worst, but as restrictions lifted and the economy looked to boom, it was as if a collective sigh of relief swept through society, and that enormous savings pot got opened. Imagine a big bottle of cola that’s been shaken up. What happens when you open it? An explosion. Coke everywhere. That’s exactly what happened to the economy.
Demand surged. Suppliers scrambled to meet it, ordering materials, consumables, and components in bulk. Their competitors saw the same trend and piled in. The result? Supply chains buckled under the pressure: ships queued outside ports, lorries sat idle for want of drivers, and fuel costs soared. On my own building sites, deliveries that once arrived the next day were suddenly taking 12 weeks. It was chaos.
The property market felt this acutely. During the various lockdowns, building projects stalled and estate agents couldn’t conduct viewings, but the number of people wanting to buy never diminished. When the market reopened, there were suddenly two or three times as many buyers chasing the same properties. Prices jumped, new buyers panicked, bidding over the asking price just to avoid being locked out, and FOMO pulled in investors from the sidelines. With 40–50 people bidding on a single home, we saw properties sell for double their listed price in some cases.
My advice then was straightforward: give the Coke bottle ten seconds to settle. Spending patterns would return to normal, savings would be spent, demand would cool. For a while, the fizz did start to settle, but before it fully went flat, Russia invaded Ukraine, sending energy prices soaring and food costs spiralling across Europe. Many households and businesses never fully recovered from that second hit. Now, the bottle has been shaken again, this time by the conflict with Iran.
New shocks
The conflict that began in February is unlike anything the global economy has absorbed in decades. The US and Israel launched strikes aimed at regime change in Iran and the elimination of its nuclear programme, and Iran hit back hard, firing missiles and drones across the region and, crucially, moving to restrict traffic through the Strait of Hormuz.
This narrow waterway carries around 20% of the world’s oil supply, and its disruption has sent the price of crude oil surging. Energy markets are swinging wildly with every new development, and the effects are already being felt far beyond the Middle East: in fuel costs, shipping prices, and the cost of materials arriving on building sites.
What this means for supply chains and construction
You’ve probably noticed it already at the petrol station. Fuel prices have surged since the war began, and it’s not just an inconvenience at the pump. For anyone in construction or property development, this hits twice: once through your own fuel costs, and again through the delivery and logistics costs baked into every material that arrives on site.
The mechanisms are the same as during Covid, but the trigger is different. War-driven oil price shocks feed directly into transport and logistics costs. Higher diesel prices mean higher delivery costs for everything: timber, steel, concrete, fixtures and fittings. Suppliers facing uncertain futures tend to stockpile, which in turn creates artificial scarcity further down the chain. We’ve seen this before, and we’re almost certainly going to see it again.
The Strait of Hormuz disruption matters well beyond the Middle East. When shipping routes are disrupted and freight costs surge, the effects work their way through the entire supply chain: longer lead times, higher delivery costs, and suppliers passing on their increased overheads. If you’re mid-project right now, it’s worth a conversation with your suppliers about what’s in the pipeline. Locking in orders sooner rather than later, even at today’s elevated prices, may prove far cheaper than waiting.
There’s also the broader question of labour and trade. Heightened geopolitical instability tends to dampen business confidence, which in turn affects hiring and investment decisions. We’re not yet at the point of widespread construction slowdown, but if the conflict extends for months, the downstream effects on project financing and developer appetite could be significant.
What does this mean for property?
The post-Covid property bubble has partially deflated: mortgage rates rose sharply from 2022 onwards as central banks fought inflation, cooling demand considerably from its 2021 peak. The frantic bidding wars have mostly subsided. But the Iran war introduces a new set of competing pressures: higher energy and material costs support asking prices, while economic uncertainty compresses buyer confidence and affordability. These forces tend to produce a sticky market, not a crash, but not growth either. Sellers hold firm, buyers hesitate, transactions slow.
What should you do?
The same advice I gave during the post-Covid frenzy applies now, with some important modifications.
Don’t panic-buy property. The instinct during geopolitical crises is to convert cash into hard assets. Property is indeed a traditional inflation hedge, but buying at the top of a market driven by fear rarely ends well. Be rational, not reactive.
Do review your material supply chain. If you have live projects, talk to your suppliers now. Understand your exposure to delayed or repriced materials. Consider forward-ordering key items if you have the storage and cashflow to do so.
Watch the Strait of Hormuz. This is the single biggest near-term variable for energy and shipping costs. A negotiated reopening, or a military resolution, could ease prices quickly. A prolonged closure forces everyone to rethink their numbers.
Build in contingency. Any project budget set before February 2026 should be stress-tested against increases in material and transport costs. If your numbers don’t work at higher levels, now’s the time to find out.
Stay informed, but don’t let headlines dictate decisions. The news cycle around this conflict is moving extremely fast, with conflicting reports of ceasefires, escalations, and diplomatic breakthroughs. Verify before you act.
Same principles, new shocks
Economics doesn’t change: supply and demand remain the fundamental forces driving every market. What changes are the triggers. In 2020 it was a pandemic, now it’s a conflict in the Middle East with direct consequences for the energy infrastructure the global economy depends on.
The Coke bottle has been shaken again, for the third time in five years. Covid, Ukraine, and now Iran, with each shock hitting before the last had fully settled. This time, we don’t yet know how long it will take to settle, or how much fizz will be left when it does. What we do know is that measured, informed decisions will always outperform panic-driven ones. Give the bottle a moment… then open it carefully.