Geopolitical tensions in the Middle East are raising concerns not only in global energy markets. Lithuania’s construction sector, currently implementing dozens of state-funded projects, is facing a critical question: are we prepared for another energy crisis?
Although the conflict between Iran and Israel may seem distant from Lithuania at first glance, its consequences would be felt here as well. Analysts warn that if Iran follows through on its threats to block the Strait of Hormuz, a globally significant oil transit route through which about 20 percent of the world’s oil passes daily, prices could rise to 100 or even 150 USD per barrel. Markets are already tense: at the end of June, Brent crude reached 78 USD, and any escalation could shock the entire European economy.
“For Lithuania’s construction sector, this is not a theoretical threat but a direct impact through increased prices and rising risks. Construction is one of the first industries to feel the blow — through material costs, logistics, and direct on-site expenses. When oil prices rise, it may mean not a few percent but sometimes a complete recalculation of a project’s profitability. This is not a distant risk but a reality that can reach us very quickly,” says Paulius Rukas, Head of Production at the general contracting and construction company Gilesta.
According to P. Rukas, when the 2022 energy crisis hit Europe after Russia’s invasion of Ukraine, construction material prices in Lithuania reached record highs: cement increased by about 30 percent, concrete by up to 40 percent, plastic components by up to 50 percent, fuel for heavy machinery rose by 50 to 70 percent, and electricity costs on construction sites in some cases increased several times. It was a real test of profitability.
Rukas explains that companies which anticipated such risks managed the situation without major losses. A large part of construction work is data analysis. We cannot calculate a budget based on today’s prices and expect everything to be fine. Before Russia’s invasion, warnings lasted for a long time — everyone understood that it could happen. What did we do? We looked at how previous conflicts affected prices, analyzed supply chains, replanned and recalculated project costs before the war even began, and purchased materials in advance wherever possible. Today, the construction companies that succeed are not only the ones laying bricks but also those that work with historical data, analyze, and forecast. The same applies now: we sense a threat, so we must take action even if the problem is not yet at our doorstep.
The biggest challenge, he notes, is that new geopolitical risks are emerging at the worst possible moment. Lithuania is planning large-scale public investments — military infrastructure, educational institutions, hospital modernization, road and bridge reconstruction. This means a high volume of construction work that greatly depends on energy price stability.
As a state, we have a clear and ambitious plan, and it is a real opportunity to modernize national infrastructure. But these plans must be implemented responsibly, assessing potential risks, especially energy price fluctuations. If prices rise again, some projects may face cost-control challenges. However, these risks can be managed — through preparedness, not only reaction, Rukas says.
He believes that both contractors and the public sector should evaluate energy cost scenarios already during the design stage and include flexibility mechanisms in contracts. Geopolitical signals should not frighten us — they should serve as indicators helping us review strategic decisions in advance. Right now we have the opportunity to implement projects that will not only meet today’s needs but also strengthen the long-term resilience of the country.
When asked what additional measures businesses and the state can take, besides contractual flexibility, to protect themselves from the consequences of conflicts in the Middle East, Rukas emphasizes investments in renewable energy.
According to him, Gilesta began investing in its own renewable energy solutions several years ago — not only as a reputational step but as a practical measure. We have our own solar power plants that cover part of our energy needs. This helps reduce costs and allows long-term budget planning without constant adjustments due to market fluctuations. Such solutions become a matter of survival, especially when working with long-term contracts where prices cannot be adjusted month to month.
Another important step is supplier selection. We have long evaluated not only price or delivery terms — we also assess whether the manufacturer uses renewable energy. This indicates that the partner is more resilient to energy shocks, which means more stable prices for us.
Rukas also notes that the public sector must take strategically important steps — especially if Lithuania wants ambitious infrastructure plans to continue without being halted by energy instability. Renewable energy should be treated as an even more important strategic direction than it is today. We are doing a lot, but could we do more? If Lithuania reaches a 45–50 percent share of green energy by 2030, as planned, we will not be talking about environmental progress but about protecting national investments from geopolitical shocks.
In his view, the most important thing now is to have a clear plan and to act. Global conflicts will not stop. If we are unprepared, every new crisis will knock us off balance. Therefore, we must plan, not merely react — both at the national and business level.