The Middle East conflict and its impact on global metals markets
Overview
The escalating conflict in the Middle East has become a key macro risk for global metals markets. Argus’ editorial coverage over recent weeks shows an immediate impact on supply of aluminium from the Middle East, a key global producer, and a swift rise in exchange prices and regional premiums in key consuming geographies as a result.
The other directly impacted input for metals markets is sulphur, which is the feedstock for sulphuric acid — critical to nickel and copper production. The Middle East is a major source of global sulphur supply.
For the rest of the metals markets, the impact of the conflict is being felt in logistics disruption, higher freight and insurance costs, and elevated risk premiums, rather than an immediate collapse in underlying supply. These factors are already feeding into prices, availability and market sentiment. This round-up brings together the key ferrous and non‑ferrous themes highlighted across recent Argus reporting.
Non‑ferrous metals: sharper exposure and faster price response
Aluminium
Aluminium stands out as the most directly exposed major metal. Argus reporting highlights that the Middle East accounts for 8-9pc of global aluminium production and is heavily dependent on the strait of Hormuz for both metal exports and imports of raw materials alumina and bauxite. The region is a major swing supplier of aluminium to Europe, the US and Asia outside of China.
Qatar’s Qatalum halted production and began a controlled shutdown after its energy supplier QatarEnergy stopped producing LNG, while Aluminium Bahrain (Alba) declared force majeure on export shipments because of the disruption to shipping through the strait of Hormuz.
Saudi Arabia’s Maaden and the UAE’s Emirates Global Aluminium (EGA) have options to transport material by truck to other ports and avoid the affected waterway, but this will entail significant time and expense, and does not solve the problem of raw material deliveries vital to continuing operations in the longer term.
London Metal Exchange and global premiums have both risen sharply as a result of the conflict. The LME official three-month aluminium price increased to $3,372/t on 4 March, up by 6.6pc from before the outbreak of the conflict.
Argus’ weekly assessment for the European P1020 duty-paid aluminium premium jumped by 20pc to $410-440/t on 4 March, while its assessment for the US Midwest premium set a new record high at $1.06-1.08/lb.
Asian premiums have also increased sharply in response to the supply disruption. In Japan, which imports 500,000 t/yr of aluminium from the Middle East, one major aluminium producer withdrew its first second-quarter main Japanese port premium offer of $250/t, and expectations are now that the quarterly settlement could rise as high as $300/t. Argus’ spot assessments for aluminium P1020 premiums cif Thailand and cif Vietnam rose by 16pc on 5 March to $195-205/t and $200-210/t, respectively.
Premiums are likely to continue to rise for as long as output from the Middle East remains disrupted.
Sulphur (linked to copper and nickel processing)
Sulphur has emerged as one of the most acutely impacted commodities in Argus reporting. A large share of global sulphur exports originates in the Middle East, and vessel backlogs, port disruptions and damage to energy infrastructure have delayed shipments. Some production facilities have also been affected, tightening the market at a time when demand from metals and fertilisers remains firm.
Argus highlights that nearly half of global sulphur exports could face delays if the conflict persists, increasing price volatility and tightening availability for downstream consumers, including copper and nickel processors that rely on sulphuric acid.
Ferrous metals: logistics risk outweighs fundamentals
Argus reporting indicates that the direct exposure of ferrous markets to Middle Eastern production is relatively limited, but indirect impacts are material. Iran has historically supplied iron ore and semi‑finished steel, mainly to Asia, yet market participants suggest that any shortfall can largely be offset by spare capacity elsewhere, particularly in China. As a result, the conflict has not fundamentally altered global steel supply-demand balances so far.
Where the impact is being felt is in logistics. Heightened risk in the Red Sea and the strait of Hormuz has increased the likelihood of longer shipping routes, higher freight rates and increased war risk insurance premiums. Argus notes that some vessels are diverting around Africa, extending delivery times to Europe. Inventories are currently viewed as sufficient to absorb these delays, but sustained disruption could add cost pressure across the ferrous value chain, particularly for seaborne raw materials such as iron ore, coking coal and ferrous scrap.
Overall, Argus coverage suggests ferrous markets are watching geopolitical developments closely, but price direction remains driven primarily by demand conditions, production discipline and macroeconomic signals rather than immediate supply shocks from the Middle East.
What to watch next
Across both ferrous and non‑ferrous markets, Argus analysis points to three key variables that will determine how the situation evolves:
- Duration and escalation of the conflict, particularly any sustained disruption to the strait of Hormuz or Red Sea shipping lanes.
- Logistics and insurance availability, as war risk premiums and vessel availability continue to shape effective supply.
- Energy prices, which feed directly into production costs for energy‑intensive metals such as aluminium and indirectly into freight and processing costs across the metals complex.
For now, Argus coverage suggests that risk premiums and volatility are likely to remain elevated, with aluminium showing the clearest and fastest response to geopolitical stress.
This blog is based on recent Argus reporting on the Middle East conflict and its impact on global metals markets.
Author name: Argus' editorial team, Metals
