How the Iran conflict is affecting non‑ferrous metals markets
Executive summary
The conflict in the Middle East and the closure of the strait of Hormuz have created an uneven shock across global non‑ferrous metals markets. The most immediate and visible effect has been in aluminium because the Middle East is a major export hub, accounting for around 9pc of global supply.
The conflict has initially been interpreted by markets as a macroeconomic risk for other base metals — feeding higher energy costs, inflation concerns and weaker near‑term demand expectations — rather than as a widespread supply outage. But disruption to sulphur availability is emerging as a critical transmission channel, with particular implications for nickel production routes and selected copper operations.
1. Market context: an uneven shock
The Middle East is not a dominant production centre for most non‑ferrous metals, apart from aluminium. Because of this, the first‑order effect across much of the complex has been indirect. Rising oil and gas prices have increased operating costs, and freight and insurance risks are elevated, while investor sentiment has shifted as markets reassess inflation and growth trajectories.
This dynamic explains why, outside aluminium, prices for several base metals softened following the outbreak of war, even as physical risks were clearly increasing below the surface.
2. Aluminium: market faces historic supply disruption
Aluminium stands out as the most directly exposed non‑ferrous metal, and the conflict threatens to create an historic supply shock that has already lifted prices towards record peaks. Gulf Co-operation Council countries produce around 6mn t/yr of primary aluminium and the majority of this is exported through the strait of Hormuz to Europe, Asia and North America.
The main supply risks during the first phase of the Iran conflict were the halt to shipments from producers that export via the strait, the cessation of inbound alumina and bauxite shipments to several key production hubs, and threats to energy supply because of Iranian strikes against Qatari gas infrastructure. Aluminium Bahrain (Alba) initiated a controlled shutdown of its reduction lines 1–3, idling about 300,000 t/yr of its total capacity, or 19pc, in response to supply constraints, having earlier declared force majeure on its aluminium deliveries. Qatar’s Qatalum cut operations to about 60pc of capacity after a reduction to its gas supply.
The situation escalated drastically on 28 March when Iranian missile strikes hit Emirates Global Aluminium’s (EGA) Al-Taweelah plant in the UAE and Alba’s plant in Bahrain. The two plants account for half of Mideast Gulf capacity, or 4.6pc of global capacity, at 3.2mn t/yr.
EGA subsequently announced that repairs to restore full production at Al-Taweelah may take up to a year, which will likely push the global ex-China aluminium market into deficit, even if shipments through the strait of Hormuz resume shortly.
The attacks saw London Metal Exchange (LME) aluminium prices soar to their highest since Russian invaded Ukraine in February 2022. Prices increased sharply at the start of the Iran conflict, before retreating on profit‑taking and broader macroeconomic pressure. But they are likely to retain much firmer support going forward as a result of the EGA outage and the risk to other Mideast Gulf aluminium plants if Iran retaliates for attacks against its own industrial infrastructure.
Physical premiums to the LME price have surged in Europe, the US and Asia, outstripping the pace of the LME uptick because of these regions’ increased exposure to a Mideast Gulf supply shock, relative to the largest global aluminium consumer China, which is essentially self-sufficient. Argus assessments for P1020 premiums in Europe and the US both rose to record highs on 1 April, pushing all-in costs for consumers above $4,000/t in both regions.
On the demand side, automotive manufacturers are particularly exposed. Qualification requirements and limited room for suitable substitutes make it difficult to rapidly replace Middle East aluminium units, increasing the likelihood of cost pressure filtering through supply chains.
3. Base metals ex‑aluminium: macro pressure dominates – for now
The conflict has so far been priced primarily as a macroeconomic shock for copper, nickel, zinc and lead. Higher energy prices threaten to increase inflation and delay interest rate cuts, weakening expectations for industrial demand. This has weighed on prices, despite the absence of immediate, large‑scale supply losses.
In nickel, these macro pressures have coincided with an already challenged demand environment and persistent oversupply in certain segments, muting the price response, even as production costs rise for some routes.
4. Sulphur: the critical second‑order constraint
Sulphur availability represents one of the most important indirect effects of the conflict on non‑ferrous metals. Sulphur is a key feedstock for sulphuric acid, which is essential to several metals processing routes.
Nickel produced via high‑pressure acid leaching (HPAL) in Indonesia is the most exposed. Indonesian HPAL facilities rely heavily on imported sulphur, a large share of which has historically come from the Middle East. Disruptions increase production costs and raise the risk of throughput constraints for battery‑grade intermediates if tightness persists.
Copper exposure is more concentrated. Acid leaching and SX‑EW operations, particularly in parts of the Democratic Republic of the Congo, are more sensitive to sulphur disruptions, while regions with substantial smelting capacity face lower risk, owing to domestic acid generation.
5. Battery materials and strategic implications
The interaction between higher energy prices, sulphur constraints and logistical risk has implications for battery‑linked metals. Cost pressures dominate in the near-term. Heightened geopolitical risk reinforces strategic interest in resilient and diversified supply chains in the longer term, even if immediate market conditions remain challenging.
Conclusion
The Iran conflict has introduced a powerful but uneven shock to non‑ferrous metals markets. Aluminium faces the most immediate risk and could face a prolonged supply shock. Sulphur availability represents the key second‑order channel, with the potential to propagate stress into nickel and selected copper production routes.
If disruption persists into the second half of 2026, market focus may shift from macroeconomic weakness toward more tangible supply tightness for key inputs, particularly natural gas. How quickly that transition occurs will depend on the duration of logistical disruption, the availability of critical inputs and the capacity of global supply chains to adapt.
Key product
Argus Non‑Ferrous Markets provides independent price assessments, market reporting and analysis across aluminium, copper, nickel and other key metals, supporting informed decision‑making across procurement, trading and risk management.
Disclaimer
This document has been prepared by the Argus Media group for informational purposes only. It is not intended as legal, accounting, tax or investment advice. While Argus endeavours to ensure accuracy, the information is provided on an ‘as is’ basis and is subject to change. Copyright © 2026 Argus Media group. All rights reserved.
