WASHINGTON, July 1 (Reuters) - U.S. construction spending edged up in May as higher mortgage rates because of the Middle East conflict constrained homebuilding.

The Commerce Department's Census Bureau said on Wednesday that construction spending rose 0.1% after a downwardly revised 0.3% increase in April. Economists polled by Reuters had forecast construction spending gaining 0.1% after a previously reported 0.4% increase in April.

Construction spending fell 1.5% on a year-over-year basis in May. Spending on private construction projects was unchanged after rising 0.3% in the prior month. Investment in residential construction increased 0.3%, reflecting renovations.

Spending on new single-family housing projects dropped 0.1%. It tumbled 4.0% year-on-year in May.

The U.S.-Israeli war with Iran boosted oil prices, driving up inflation and mortgage rates. The average rate on the popular 30-year fixed-rate mortgage has increased by about 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed.

It averaged 6.49% last week. Spending on multi-family housing units, which account for a small share of the housing market, dipped 0.1% in May.

Investment in private nonresidential structures such as power plants and factories declined 0.3% in May. Spending on factory construction dropped 1.3%, while outlays on power plants eased 0.1%, despite a surge in the construction of data centers to support artificial intelligence.

Investment in public construction projects increased 0.5% after a similar gain in April. State and local government construction spending rose 0.4% in May while outlays on federal government projects jumped 1.3%, likely boosted by the building of detention centers as part of an immigration crackdown.