The Middle East war sparked by clashes between the United States and Iran is roiling energy, interest rates, and commodity prices all at once, sending ripple shocks through the global market for dwellings.
In the United Kingdom, the financial market shock from the war quickly spread to the market for dwellings. According to the Guardian, within 48 hours of the outbreak of war, hundreds of mortgage loan products were withdrawn and replaced with higher-rate offerings. As expectations for rate cuts disappeared and the possibility of hikes was instead priced in, a mood of postponing transactions spread among both buyers and sellers.
Andy Wicking of real estate agency Charles Bainbridge said in an interview with the Guardian that "the market mood is fear and uncertainty itself," noting that among dwelling owners who asked the firm for home price valuations in the first quarter, only 47% actually listed their properties. That is a sharp drop from 68% in the same period in 2025.
In Japan, the raw material shock became a direct driver of home price fluctuations. As the Middle East war reduced supplies of naphtha, a petrochemical feedstock, construction material prices surged. Naphtha is a plastic and synthetic resin feedstock used to produce insulation and paint. Insulation prices rose by nearly 40%, and thinner used in paint jumped more than twofold. With some materials becoming outright hard to procure, cases of construction delays and new orders being halted have continued.
Japanese Prime Minister Sanae Takaichi said there would be no supply problems thanks to stockpiles and alternative sourcing, but on the ground there are still assessments that supply-demand instability has not been resolved.
Korea is showing a similar trend. Due to raw material supply disruptions stemming from the Middle East, supplies of key construction materials such as ready-mix concrete admixtures, steel, and insulation are wavering, raising concerns about process delays at construction sites. If construction delays pile on top of already reduced supply, some analysts say upward pressure on home prices could increase. According to Real Estate R114, in the first quarter this year, the number of general apartment sales nationwide was 17,216 households, down 61.5% from the previous quarter.
Jeon Gyu-yeon, a researcher at Hana Securities, said, "After the war, Korea's consumer sentiment fell for two consecutive months in March and April, making it highly likely that private consumption will gradually weaken, and with rising raw material prices, it will also be difficult for a recovery in construction investment to continue."
The situation is no different in the United States and the Middle East, the parties to the war. In the United States, while housing costs rose 3% from a year earlier, mortgage loan rates are still above 6%, constraining demand. With the war amplifying supply chain instability and existing tariff burdens adding on, prices of construction materials such as lumber, steel, and copper have risen. On top of that, tighter immigration enforcement has reduced labor supply, pushing up overall dwelling supply expense.
Thomas Ryan, a North America economist at Capital Economics, said in an interview with the BBC, "Following the recent spike in interest rates and the collapse of consumer confidence, there are signs that demand for dwellings is weakening," adding that it is "a chain effect of the Iran conflict."
Dubai also took a direct hit from the war. Dubai has attracted foreign capital by promoting its duty-free and foreigner-friendly policies. But as tensions in the Middle East have recently intensified, the local market for dwellings is also contracting. The March home price index compiled by real estate consultancy ValuStrat fell 5.9% from the previous month, marking the first decline since 2020. Transaction volume also fell sharply. According to real estate research firm REIDIN, the number of transactions likewise dropped from about 16,000 in February to around 13,000 in March.