Construction firms in the Balearics have warned that the ongoing conflict involving Iran is driving fuel costs higher, potentially putting numerous infrastructure projects in the archipelago at risk if the situation persists. This surge in energy prices is causing a notable increase in key material costs, especially tarmac, which plays a fundamental role in road construction and maintenance.
Tarmac's sensitivity to oil market fluctuations is particularly pronounced during crises like the current disruption caused by the closure of the Strait of Hormuz and attacks on Gulf Coast refineries. This is because its main ingredient, bitumen, is directly derived from crude oil. Additionally, tarmac is bulky and heavy, requiring specialised transport vehicles, which adds to expenses amid rising fuel prices affecting logistics.
"It will be the first material to reflect the crude oil price rise," says Sandra Verger, manager of the Balearic Builders Association linked to CAEB. While cement, steel, aluminium, and ceramics are also expected to become more expensive, none are likely to experience the rapid price increase predicted for tarmac. "Because of bitumen, the price hike will be automatic in this case." Although the construction sector has highlighted impacts mainly on housing developments, concerns are also rising for critical infrastructureprojects, particularly in roadworks.
Authorities prepare for budget adjustments amid rising costs
Sources at the Council of Mallorca confirm that road department officials have been alerted by construction companies about anticipated budget challenges. Consequently, they are drafting a report assessing how the Middle Eastern conflict might affect ongoing and planned road infrastructure projects on the island. The Consell, along with other island councils, may need to significantly adjust project budgets to prevent tenders from being abandoned or partially completed if the crisis continues.
Several important works are currently underway or pending tender throughout the island. Active projects include the reinforcement of the road between Peguera and Port d’Andratx (€5 million); the civic road and roundabout at Crestatx-Sa Pobla (€3 million); comprehensive renovation of the Bunyola-Orient-Alaró road (€5 million); and the refurbishment of bridges on the Sant Llorenç des Cardassar bypass to prevent flooding (€9.2 million). Projects in tender or about to start include the Camp de Mar to Peguera civic road (€1.3 million); improved access to Llucmajor’s waste treatment plant (€1 million); and the Santanyí variant at s’Alqueria Blanca (€12 million).
Major investments focused on Palma's access improvements
There is also an investment totalling €164 million spread over a dozen projects aimed at enhancing access routes in Palma. Significant undertakings include strengthening the pavement on the Vía de Cintura between the airport motorway and Valldemossa road (€11.6 million); upgrading accesses to the Son Hugo interchange with an additional lane between the Inca motorway and Valldemossa road (€13 million); and a larger-scale work with the first section of the second ring road (€110 million).
The Council is drawing on experience from similar situations such as the response to the Ukraine invasion in 2022, when it activated a €44 million emergency plan under then-president Catalina Cladera. This included a €5 million allocation specifically aimed at offsetting material cost rises in road network projects.
Implications for protected housing initiatives
The oil crisis’s impact on the construction sector also threatens the local plan to boost protected housing. Data from the Official College of Architects of the Balearic Islands (COAIB) shows that 555 protected homes were approved in 2025, comprising 266 official protected multi-family units (VPO), 267 limited-price multi-family units (VPL), and 22 limited-price single-family homes. The Housing Ministry states that project planning consistently accounts for price trends, particularly under global pressures such as the ongoing Iranian conflict.