Recently, a subspace fitting approach has been proposed for vibration-based finite element model updating. The approach makes use of subspace-based system identification, where the extended observability matrix is estimated from vibration measurements. Finite element model updating is performed by correlating the model-based observability matrix with the estimated one, by using a single set of experimental data. Hence, the updated finite element model only reflects this single test case. However, estimates from vibration measurements are inherently exposed to uncertainty due to unknown excitation, measurement noise and finite data length. In this paper, a covariance estimation procedure for the updated model parameters is proposed, which propagates the data-related covariance to the updated model parameters by considering a first-order sensitivity analysis. In particular, this propagation is performed through each iteration step of the updating minimization problem, by taking into account the covariance between the updated parameters and the data-related quantities. Simulated vibration signals are used to demonstrate the accuracy and practicability of the derived expressions. Furthermore, an application is shown on experimental data of a beam.