It's not just oil: Aluminum prices have surged as Iran conflict chokes supply

In this articleThe U.S. and Israel's war with Iran has upended the supply of aluminum in the Middle East, sending prices of the base metal skyrocketing.While aluminum may be the most abundant metal on earth, it is crucial to the function of the world economy. It is an essential material across electronics, transport, and construction, as well as other industries such as solar panels and packaging. At the outbreak of the Iran conflict on Feb. 28, 3-month LME aluminum futures initially jumped by as much as 10% by March 12 before paring some gains to land around 8% higher, as the effective closure of the Strait of Hormuz has caused a significant disruption to supply. It's been the best-performing industrial metal over the past two weeks, and prices are now hovering just below 4-year highs at $3,370 as of Wednesday afternoon in London. Bahrain's Alba, which hosts the world's largest smelter, has also cut production by 19% of its 1.6 million tons of annual output, only adding to fears of a global shortage.Lower stock levels and the potential for further supply disruption in the Middle East could push prices towards $4,000 per ton, according to metals intelligence provider CRU Group. CRU principal analyst Guillaume Osouf wrote in a recent article that the LME price would likely be much higher now if it wasn't for weak global demand for the metal."A prolonged conflict will likely drastically change our market outlook for the rest of the year due to the lasting impact this will have on global supply, and the potential negative effects on demand," he added.The answer as to where the price could be headed next lies with China, according to other analysts. China is the biggest producer of aluminum and tends to keep production constrained at 45.5 million tons per year to reduce emissions and prevent overcapacity issues. "If the Chinese government decides that the prices are too high they can restart a number of idle smelters in the country and the world will be full of aluminum," Artem Volynets, CEO of miner ACG Metals, told CNBC's Europe Early Edition on Wednesday. Despite the recent rise in price on the LME, neither analyst sees aluminum becoming a significant trade for retail investors, as is the case with silver and copper. Volynets added that he would be "surprised" to see retail investors involved in such an industrial element, while Osouf told CNBC that the gross long position is only marginally smaller than what it was at the end of January, so involvement from funds has been limited since the start of the conflict. "Interestingly, the shorts have increased their exposure by 15k lots, suggesting a larger portion of investors believe in lower prices from now," he added. Got a confidential news tip? We want to hear from you.Sign up for free newsletters and get more CNBC delivered to your inboxGet this delivered to your inbox, and more info about our products and services.© 2026 Versant Media, LLC.

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