Fuel prices soar on back of Iran war, leaving Yemeni labourers with no work 

Taiz, Yemen – Fuad Mohammed has been working as a construction labourer for more than 25 years. The 46-year-old has seen things get progressively worse in Yemen’s construction industry since the war in the country started more than a decade ago, and then further deteriorate after the US-Israel war on Iran began in late February, with its devastating economic impact on the wider region.

“We can barely eke out a living for our families,” Fuad told Al Jazeera.

The ongoing regional war has damaged economies across the Middle East, with government-controlled areas of Yemen bearing a heavy burden as commodity prices soar. Among the hardest-hit sectors is fuel: in January, 20 litres (5.3 gallons) of diesel cost 25,000 Yemeni riyals ($17), but today that price has skyrocketed to 45,000 riyals ($30). That massive spike has triggered a domino effect, driving up the costs of all goods and services dependent on fuel and transportation – including construction.

As a result, countless construction projects across those areas – in Yemen’s east and southwest – have ground to a halt.

Pausing construction

Fuad explained that, before the US-Israel-Iran war, he was able to find work for around two weeks every month. But this year, he has now gone several months with barely any work.

“The price hikes in building materials have frustrated both homeowners and construction labourers,” Fuad said. “Those who want to build find that their budgets are no longer enough, and we are left with no work.”

Fuad recalled that he briefly found work in May for a woman who had saved money to build a home for her family. However, when a fresh wave of price increases hit the market, she paused construction to wait for prices to drop.

“I also work with construction contractors, but most of them have paused their projects at the request of homeowners,” he added. “When I call them, they tell me they are waiting for regional conditions to improve.”

As an example of the rising costs, the price of a truckload of sand increased from 130,000 Yemeni riyals ($87) to 190,000 riyals ($127), while the average cost of one metre of window glass rose from 90,000 riyals ($60) to 130,000 riyals ($87).

Fuad’s situation at home is desperate. Relying entirely on daily wages but having no work, he can not provide basic essentials for his family. He has considered finding another job, but he lacks professional experience in other fields.

In a desperate attempt to find work, he has lowered his daily wage from 25,000 Yemeni riyals ($17) to 20,000 riyals ($13).

“My situation is getting worse every day,” he said.

Economic division

An official from the Yemen Petroleum Company in Aden told the Reuters news agency in May that the increase in the price of diesel was caused by the worsening supply crisis and rising global fuel prices, driven by regional tensions and the closure of the Strait of Hormuz, alongside increased transportation and marine insurance costs. The official noted that the measure was temporary and would remain in place until the end of the crisis and conditions returned to normal.

Wafeeq Saleh, executive director of the Taiz Center for Yemeni-Gulf Studies, explained that the Yemeni economy was particularly susceptible to external economic shocks.

“Any disruptions in global commodity markets directly affect the local market because [Yemen] imports nearly 90 percent of its needs,” Saleh told Al Jazeera. “Consequently, the local rise in commodity and fuel prices is a natural outcome of surging global prices, shipping tensions in the Strait of Hormuz, as well as increased maritime insurance and freight fees.”

In areas controlled by Yemen’s Houthi rebels, however, including the capital Sanaa, there has not yet been a sharp increase in fuel prices, and therefore no impact on the construction industry – yet.

Yemen’s war has entrenched two separate economic structures in the country, with the central bank bifurcated between Aden and Sanaa, and two different exchange rates operating for the Yemeni riyal.

The Houthi group is already facing popular anger over a weak economy, as it grows increasingly isolated regionally and internationally. The group has so far avoided an increase in the price of fuel, with 20 litres (5.3 gallons) of diesel costing 9,500 Yemeni riyals, which at the exchange rate set in Sanaa is the equivalent of roughly $18.

“[The Houthis] may have sufficient inventory from previous months, which is why the local market hasn’t been affected,” Saleh said. “However, the impact will appear in the coming period when imports are made at the new price.”

The actions of the pro-Iranian Houthis themselves have contributed to the increase in global oil prices. Having sat out the Iran war for its first few months, the Houthis recently began attacks against Saudi ships passing through the Red Sea, after the Yemeni government and the Saudi-led coalition that backs it refused to allow a plane from Iran to land in Sanaa. The Houthi attacks mean that the transportation of oil from the Gulf is now disrupted in both the Strait of Hormuz and the Red Sea, and has contributed to oil prices going past $100 a barrel for the first time since May.

Will prices come down?

Lutf Zuraiqi, 58, had saved some money to build a home, but the dramatic increase in the cost of building materials forced him to pause the project until “things get better”.

“Price increases aren’t new in Yemen, but I believe this current surge is regional. I believe as soon as the regional war ends, building materials will return to their old prices,” Zuraiqi told Al Jazeera.

Zuraiqi has been following news of the Iran war on a daily basis because its end would mean lower material costs for him and the chance to resume building his planned home.

“The government promised that prices will go back down after the [US-Iran] war ends,” he said. “So this time I’m choosing to believe them and hope I will manage to finish my home.”

Mohammed Jameel, on the other hand, hasn’t been following the news – but the building contractor has been tracking prices of building materials instead. The 59-year-old believes that, based on his experience, once the price of the materials goes up, they never come down.

“I have worked in construction for more than four decades now, and throughout this entire period, building material prices have consistently risen,” Jameel said. “We have never witnessed a price drop. So, I advise those who have paused their construction to resume, as today is always better than tomorrow.”

Jameel said that he has been forced to reduce his rates and cut profit margins on major contracts to keep some work.

“My experience tells me it is normal for owners of homes and projects to pause work until they adapt to the new prices,” he added. “But eventually, construction labourers’ wages will rise, and the total cost of building will increase.”

Jameel feels for the plight of construction labourers, but he views this as a temporary phase and believes the suffering will ease once work picks up again. “We are all in the same boat, not just the daily wage labourers,” he said. “But we hope things will get better.”