Recent supply risks triggered by Middle Eastern conflicts have propelled aluminum prices to multi-year highs, imposing cost pressures on a wide range of industries from automakers to beverage can producers. Data shows that since the U.S. and Israel launched attacks on Iran on February 28, aluminum prices on the London Metal Exchange (LME) have surged by more than 13%, with a year-to-date increase of approximately 19%, briefly reaching the highest levels since 2022. Bob Brackett, an analyst at Bernstein, noted that the price rise is primarily due to the closure of the Strait of Hormuz, a critical shipping route for aluminum exports from the Middle East, which accounts for about 7% of global aluminum supply. He added that the conflict has damaged related facilities and removed roughly 3% of global aluminum supply from the market.
One of the world's largest single-site smelters, Aluminium Bahrain (Alba), has been forced to initiate production cuts since mid-March due to dual pressures of hindered metal exports and constrained raw material supplies caused by shipping disruptions in the Strait of Hormuz. The company has phased out three main production lines, directly impacting about 19% of its annual output capacity. This strategic reduction aims to extend the usage cycle of existing bauxite and alumina inventories, ensuring the long-term operational security of core plant facilities. Additionally, Emirates Global Aluminium (EGA), the largest aluminum producer in the Middle East, suspended operations at one of its smelters following a missile attack by Iran and has invoked force majeure clauses for at least some deliveries.
The impact of rising aluminum prices is beginning to manifest in corporate costs. Sherry House, CFO of Ford, stated that the Middle East conflict has heightened uncertainty regarding the outlook for aluminum, a key material used in its F-150 pickup trucks. The Detroit-based automaker anticipates that commodity-related headwinds will exceed $2 billion, roughly double prior estimates, largely driven by aluminum price increases. House remarked late last month, "Given the volatility we are seeing in commodity markets, it is difficult to project for 2027. For both steel and aluminum, we were already observing global shortages even before the Middle East conflict escalated." UBS analyst Joseph Spak noted that aluminum prices have been a key focus for Ford investors. Since the onset of the Middle East conflict, Ford's stock has declined by 17%, while the S&P 500 index has risen by 5.7%. However, Spak suggested in a recent client report that Wall Street's concerns over aluminum prices are "overstated," adding that Ford has hedged against aluminum price risks for the current year.
Tracey Joubert, CFO of Molson Coors Beverage Company, reported last week that rising aluminum costs for shipments to the U.S. Midwest increased the company's first-quarter cost of sales by approximately $30 million year-over-year. The producer of Coors Light and Miller Lite, which has used recyclable aluminum cans for over six decades, expects aluminum prices to continue rising this quarter. Similarly, Anthony DiSilvestro, CFO of Keurig Dr Pepper, cited aluminum as one of several commodities experiencing price increases due to the Middle East conflict. He indicated that if elevated costs persist, the company will need to implement strategies to protect profit margins. In a recent analyst call, DiSilvestro stated, "Like many consumer packaged goods companies, we are directly and indirectly affected by commodity price volatility linked to the Middle East conflict."
Short-term relief for aluminum supply disruptions appears unlikely. UBS forecasts global aluminum supply growth of just 0.3% in 2026, down from a previous estimate of 2.4%, citing Middle Eastern disruptions and limited capacity expansion potential in Europe as key factors. Beyond conflict-related issues, Bob Brackett highlighted that aluminum production is energy-intensive, linking its price to natural gas and coal costs. As the Middle East conflict drives up fuel prices, additional upward pressure on aluminum prices is expected. In a recent client report, Brackett warned, "Aluminum prices rise with increasing input costs. There is further upside risk, not only from supply chain disruptions but also from interruptions to energy sources." Earlier analyses suggested that prolonged conflict in the Middle East leading to sustained energy price increases could elevate power costs for smelters in the region and globally, compressing profit margins. Given that production resumptions and new capacity additions in Europe and the U.S. are already slow due to power supply issues, higher global energy costs may force shutdowns or output reductions in high-cost regions, further straining global primary aluminum supply and driving prices upward.
Last month, J.P. Morgan issued a research report warning that the global aluminum market is heading toward a significant supply-side "black hole" amid severe and persistent supply deficits. The bank described the current situation as the largest supply gap in 25 years, evolving from cyclical tightness into a structural, persistent supply collapse that cannot be quickly resolved. The term "black hole" refers to a scenario where, once key smelting capacity is damaged, even if geopolitical tensions ease and logistics improve, the market cannot rapidly return to previous equilibrium levels. This crisis is considered the most severe in a quarter-century not only because the Strait of Hormuz disruption hindered raw material and finished product flows, but also because direct attacks on key smelters in Abu Dhabi and Bahrain have transformed what might have been a short-term logistical issue into a permanent loss of smelting capacity. Consequently, market pricing now reflects actual metal shortages over multiple quarters or longer, rather than mere risk premiums.
Crucially, the aluminum industry exhibits low supply elasticity, making this crisis path-dependent. Unlike typical commodities where higher prices quickly incentivize supply increases, restarting idled smelters involves substantial capital, energy, equipment, and technical challenges, often requiring years rather than weeks or months. J.P. Morgan emphasized that once a supply deficit is priced into the market, it will not disappear quickly with ceasefires or improved shipping conditions. With direct damage to key smelting assets, price increases increasingly reflect irreversible capacity loss and delayed supply recovery, not just geopolitical risk premiums. The bank argued that the aluminum market is transitioning from a long-standing surplus narrative to one dominated by capacity destruction, limited substitution, and regional imbalances, making a $4,000 per ton price target not an aggressive scenario but a natural outcome of an expanding supply black hole.
In March, Goldman Sachs also warned that prolonged closure of Middle Eastern shipping routes could deplete regional inventories, potentially pushing aluminum prices above $4,000 per ton, with profound implications for global manufacturing cost structures. A team led by Michael Hartnett, Bank of America strategist often referred to as "Wall Street's most accurate," projected that even if the latest Middle East conflict subsides, the commodity market rally could persist for years, lasting until the end of 2030. The strategists wrote that investors will continue flocking to commodities as a hedge against geopolitical and macroeconomic turbulence. In their view, commodities represent the most logical and highest-conviction "post-war trade," potentially outperforming stocks in the coming years. Key drivers include investor needs to hedge against risks, inflation, and a weaker U.S. dollar, while geopolitical tensions and the global AI race intensify competition for energy, rare earths, minerals, and critical resources. The strategists summarized the core logic: whoever controls semiconductors, rare earths, minerals, and efficient energy will prevail in the global AI race. This implies that in the post-war world, pricing dynamics will hinge not only on interest rates and corporate earnings but also on resource security, supply chain control, and fiscal expansion.
