Global Trade
March 10, 2026
What the Iran conflict could mean for demand, prices
Written by Stephanie Ritenbaugh
Aluminum markets remain in flux as the US-Israeli attack on Iran enters its second week.
During a webinar hosted by AMU’s parent company, CRU Group, analysts discussed what could be in store should the war escalate further.
Upward pressure on prices could lead to more substitutions by competing materials, noted Paul Williams, head of aluminum value chain.
“Aluminum does look more vulnerable to price shocks because of the regional importance of primary production here,” Williams said. He added the market has already seen the impact of price competitiveness in places like the United States, where there is “already been massive price escalation due to the 50% tariffs on ingot inputs.” That has created a large premium over the LME in terms of the overall price when increased fabrication fees for most downstream products are included.
“And we’re already seeing some demand destruction in the US because of the price situation, vis á vis steel, for example. Even within automotive, there has been some switch back to steel where it’s been possible,” Williams said.
As of Tuesday, the Strait of Hormuz, a critical shipping checkpoint, remains effectively closed to traffic. This has left shipments of aluminum and its feedstocks in limbo and sent oil and natural gas prices skyrocketing. Oil prices soared past $100 a barrel on Monday before settling lower. The last time that happened was when Russia invaded Ukraine in 2022.
If the Iran conflict is prolonged, we could see a situation similar to the start of Russia’s war with Ukraine, Williams said.
“Then you had the escalation oil prices, escalation of gas prices, very constrained freight. Inflation, of course, started becoming more rampant,” Williams said. “And you have the tightening monetary policies, interest rates rising, and the fallout on economic growth.”
Ex-China, in the two years after the Russia-Ukraine war started, aluminum demand came off by about 1.5 million tons, Williams said. Using that reference point, Williams estimates that we could see 2 million tons in lost demand in the longer term if the Iran conflict persists.
LME impact
As for the impact to the London Metal Exchange, there are a range of possible outcomes.
“It’s not surprising that we’ve seen prices hit sort of a four-year high,” Ross Strachan, head of aluminium raw materials, said. “But it’s also noticeable that the price hasn’t, frankly, moved up super dramatically.”
Strachan said there are several factors at play in the price. One is uncertainty around how long the conflict will last.
“I think, generally, markets are taking a fairly cautious approach around that and that it might not last as long as some of us fear,” Strachan said. “An important caveat to that is, though, often major conflicts last significantly longer than is expected.”
“Also… the potential demand destruction that could occur is very large, too,” Strachan said.
“The risk in the short term is prices may move significantly higher, particularly if there are much deeper production cuts necessary in the region for any reason.”
“The medium-term worry is, obviously, what does this end up meaning for demand with that very high price, with an environment with almost certainly significantly higher energy prices, and hits that makes on consumer spending,” he said. “Also, in turn, the impact up through the premium.”
If you got to a situation where you get $4,000 a ton on the LME, the duty, for example, in the US market, would have to be $2,000 before you put in any other costs on top of that,” Strachan said. “It’s a very challenging situation.”
