Impact of the Strait of Hormuz Closure on Global Metals Markets (Early-2026)

Introduction

The Strait of Hormuz is a narrow, 21-mile-wide waterway between Iran and Oman that carries roughly one-fifth of the world's crude oil and condensates and about 20% of global liquefied-natural-gas (LNG) flows. In early 2026, the United States and Israel launched attacks on Iran, prompting Tehran to re-close the Strait after brief ceasefire openings. Almost all commercial shipping avoided the area because insurers refused coverage and shipping lines suspended bookings.

The closure removed an estimated 12 million b/d of oil supply and created a multi-sector shock that extended far beyond energy: essential industrial chemicals such as sulfur and helium, metals such as aluminum and copper, and raw materials for batteries and fertilizers all pass through this choke point. This report analyzes how the closure reverberated through global metals markets.

Exposure of Industrial Metals to the Strait of Hormuz

Aluminum

Gulf smelters (Bahrain, UAE, Saudi Arabia and Qatar) produced approximately 6.2 million tonnes of primary aluminum in 2025 — about 8–9% of world output — and export roughly 5 million t/year through the Strait. Europe depends on Middle-Eastern aluminum for ~20% of its consumption, and the U.S. imports about 22% of its aluminum from the region.

When the Strait closed, GCC smelters faced logistical bottlenecks. Rotterdam duty-unpaid premiums climbed from $280–320/t to $300–340/t and were expected to reach $400–420/t. U.S. Midwest premiums and Japanese spot premiums also rose. London Metal Exchange (LME) three-month aluminum rallied to approximately $3,315/t, close to its four-year high — having previously spiked to $3,492/t amid low inventories (~418,675 t). Over 150,000 tonnes of aluminum were withdrawn from LME warehouses after the closure, signalling supply anxiety.

Because aluminum production is highly energy-intensive, the Gulf's low-cost natural gas gives it a strategic advantage. Losing this output left Western consumers scrambling amid sanctions on Russia and a closed Mozal smelter in Mozambique. Billet markets saw price quotes above $700/t, and European extruders faced longer lead times due to diversion around Africa — adding 20–25 days. Energy-driven cost increases also affected downstream sectors such as transport and renewables.

Copper

The United Arab Emirates' Jebel Ali hub normally re-exports ~40,000 t/month of copper cathode. With the Strait shut, major carriers (MSC, Maersk, Hapag-Lloyd) halted bookings, and alternative ports (Khor Fakkan and Fujairah) operated near capacity. Roughly 750 ships were stranded in the Gulf, and war-risk insurance premiums surged. Wire-rod producers across the Gulf Cooperation Council reported shortages. The disruption threatened Iran's refined-copper exports (312,000 t in 2024) and limited sulfur supply needed by African copper leach operations.

LME copper prices had touched a record $13,952/t in late January on supply worries and strong electric-vehicle demand, but retreated as energy shocks raised fears of demand destruction. Nonetheless, the combination of longer shipping routes, higher premiums and sulfur shortages kept market participants nervous.

Steel and Iron Ore

Although most iron ore does not transit the Strait, the closure increased shipping distances and fuel prices, raising the industry's cost base. Scenario modelling by S&P Global estimated that with the strait shut and Brent trading above $117/bbl, the global iron-ore cost base would increase by 11.3% — from $50.81/dmt to $56.57/dmt. This assumes a 13% rise in freight rates, an 18% increase in diesel costs and 15–40% higher electricity prices. Europe's steel producers faced freight delays of 20–25 days around the Cape of Good Hope and freight rates that tripled.

Iran and Bahrain account for about 18% of global seaborne pellet exports. After February 28, no bulk carriers loaded with iron ore were observed entering the Gulf. While seaborne iron-ore supply remained adequate, the market feared tighter availability of high-grade pellets used in low-carbon steelmaking.

Nickel and the Battery-Metals Complex

Sulfur is a by-product of oil and gas refining and is converted to sulfuric acid — a workhorse chemical used to extract nickel, cobalt, copper and lithium from low-grade ores. The Middle East supplies roughly 24% of the world's elemental sulfur; prior to February 28, about half of global seaborne sulfur transited the Strait. After the closure, shipments collapsed: only 180,000 t of sulfur left the Gulf in March and 30,000 t in April, versus a pre-war average of 1.27 million t/month. Delivered sulfur prices to Asia rose to approximately $880/t — a 50% jump from pre-war levels.

Nickel is especially vulnerable because high-pressure acid leach (HPAL) plants require 8–10 tonnes of sulfur per tonne of battery-grade nickel. Indonesia, which produces over 60% of global nickel, imports approximately 75% of its sulfur from the Middle East. The sulfur squeeze forced HPAL operators to trim output; Zhejiang Huayou Cobalt halted half of its capacity. Macquarie Bank estimated that new Indonesian capacity of 100,000 t planned for 2026 could be delayed, and break-even costs for HPAL nickel have risen above $18,000/t.

LME three-month nickel prices hit a two-year high of $20,000/t — up 14.5% since January — as investors bet that Indonesia's output would shrink. The International Nickel Study Group now expects the global market to shift from a 283,000 t surplus in 2025 to a 32,000 t deficit in 2026.

Other Critical Minerals and Industrial Inputs

• Sulfuric acid: Battery-grade nickel, copper, cobalt, lithium and uranium processing depends on sulfuric acid. Many HPAL plants have just 1–2 months of stock; sulfur prices surged approximately 70% and Indonesian mines lack alternative supply routes. Chile, the world's largest copper producer, imports over 1 million t of sulfuric acid annually and saw prices rise 44%.

• Helium: Qatar's Ras Laffan complex produces around one-third of global helium. Technical problems combined with the Hormuz closure have unsettled markets, threatening semiconductor manufacturing and medical MRI systems.

• Fertilizers: Roughly one-third of globally traded fertilizers transit the Strait; disruptions have tightened nitrogen and phosphate supplies, pushing up prices and threatening food security.

• Graphite, methanol and ethylene feedstocks: Methanol, graphite precursors (petroleum coke), glycol and hydrogen feedstocks saw disrupted flows, filtering impacts into plastics, textiles, synthetic rubber and green-hydrogen industries.

Stock-Market and Commodity-Index Signals

Financial markets reflected the shock across all major commodity classes:

These movements underline the complexity of investor behaviour: while safe-haven demand initially lifted precious metals, the energy-driven inflation shock forced central banks into a hawkish stance, raising real interest rates and encouraging investors to sell non-yielding assets (gold and silver). Industrial metals such as aluminum and nickel, however, benefited from fears of chronic shortages.

Perspectives from Arabic Sources

Arabic-language reporting highlights regional perspectives often missed in Western outlets:

• Price dynamics: Gulf sulfur prices climbed from ~$500/t to around $900/t as delivery costs rose. Analysts noted that Indonesian nickel operations could be disrupted because 75% of their sulfur imports come from the Gulf.

• Battery-grade nickel: Arabic reports emphasise that producing one tonne of high-purity nickel requires 8–10 t of sulfur, reinforcing the dependency of battery supply chains on Middle-East sulfur.

• Aluminum stocks: More than 150,000 t were withdrawn from LME warehouses, raising concerns about impacts on construction, transportation and renewable-energy sectors.

• Helium crisis: With Qatar's Ras Laffan facility producing approximately one-third of global helium, technical issues compounded by the Hormuz closure amplified worries about semiconductor and medical sectors, with supply potentially offline 3–5 years.

• Supply-chain fragility: Turkish miner representative Mehmet Yilmaz warned that disruptions in sulfur, iron ore and graphite could paralyse industries from agriculture to high-tech, noting that mining costs have risen 11.3% because of higher freight and fuel costs. Turkey, which imports approximately 68% of its intermediate goods, faces significant vulnerability — though domestic mining could offer opportunities.

Precious Metals: Safe-Haven Dynamics and Monetary Policy

Gold

Gold typically benefits from geopolitical risk, but the 2026 crisis produced a complex price pattern. Spot gold surged to approximately $5,589/oz on January 28 amid early supply shocks and then plummeted ~11.6% in March to ~$4,668/oz — its largest monthly drop since 2008. Forced selling by funds and the loss of Gulf oil revenue flows (which traditionally cycle into gold purchases) drove the decline.

By late March, gold prices hovered around $4,418/oz and analysts expected year-end targets between $5,000–6,300/oz depending on inflation and Federal Reserve policy. Gold ETF holdings fell 3% in March, while silver ETFs dropped 4.3%, indicating investor retrenchment. Central banks remained net buyers, however, and some analysts argued that gold's role as a monetary anchor is strengthening as energy shocks threaten financial stability.

Silver

Silver exhibited even greater volatility. Prices collapsed approximately 44% from a January all-time high of $121.64/oz to ~$67/oz by late March — down 27.9% over the prior month. This is attributed to a rise in real interest rates rather than weakening industrial demand; investors shifted into yield-bearing assets even as energy-related inflation rose. Silver's recovery depends on either a central-bank pivot or stagflation, and safe-haven demand can be overwhelmed by liquidity stresses.

Platinum Group Metals (PGMs)

PGM equities lagged gold miners during Q1 2026 due to softer prices and operational pressures. Palladium and platinum, used in catalytic converters and hydrogen applications, experienced price pressures similar to silver, as rising real rates weighed more heavily than geopolitical risk premiums.

Broader Supply-Chain and Economic Effects

• Freight and insurance costs: Rerouting vessels around the Cape of Good Hope increased voyage times by 20–25 days and tripled freight rates. War-risk premiums added further cost. S&P Global estimated shipping contributed $2.12/dmt to the iron-ore cost increase, while diesel costs added $1.54/dmt.

• Energy prices: Brent crude spiked above $117/bbl during the crisis. Natural-gas prices in Europe rose 60% within ten days, and electricity prices increased over 13%. Such spikes raise production costs for metals smelting and processing across all major consuming regions.

• Fertilizer and food security: With about one-third of global fertilizer transiting the strait, nitrogen and phosphate prices jumped. Indonesian and African farmers faced higher fertilizer costs and potential shortages, threatening crop yields during the Northern Hemisphere planting season.

• Semiconductor and high-tech industries: Helium shortages hindered semiconductor lithography and MRI production. Sulfuric-acid shortages threatened battery materials, integrated circuits and advanced military hardware. The Observer Research Foundation observed that shortages of sulfur, helium and bromine could disrupt defence manufacturing, data centers and green-hydrogen infrastructure.

• Global equities and diversification: Commodity-linked equities outperformed broader markets. The Bloomberg Commodity Index gained 11.15% in March alone — its largest monthly gain since 2009. Meanwhile, the S&P 500 fell ~5% during the month, illustrating the diversification benefits of commodity exposure.

Historical Patterns and Forward-Looking Analysis

Historical Context

Past Hormuz crises — the 2011–2012 Iranian closure threats and the 2019 tanker attacks — caused shorter-lived spikes in oil prices but little sustained impact on metals. Brent briefly rose above $120/bbl in 2011, but metals prices stabilised as the strait remained open. The 2026 closure, by contrast, represents a true supply cut: vessels were physically prevented from transiting and insurance coverage evaporated. Combined with simultaneous drone strikes on Qatar's LNG hub and ongoing restrictions on Russian metals, this created a perfect storm for metals markets.

Forward Scenarios

• Persistent deficits in aluminum and nickel: Even if the Strait reopens, logistical bottlenecks and energy-price volatility could keep premiums elevated. European and Japanese aluminum premiums are anticipated to rise above $400/t and billet prices to exceed $700/t if Gulf smelter outages persist. Nickel markets are likely to swing into deficit by 2026, supporting prices around $18,000–20,000/t.

• Copper and sulfuric-acid supply risks: Indonesian and African mines may face curtailments if sulfuric-acid stockpiles are exhausted. Chile, which relies on imported acid for 20% of its copper output, could see production costs rise further. Long-term electrification demand remains strong, so supply disruptions could push copper above January's record high once macroeconomic uncertainty recedes.

• Precious metals sensitivity to monetary policy: Gold and silver prices will hinge more on real interest rates than on geopolitical risk. If inflation remains elevated and central banks maintain a hawkish stance, precious metals may underperform despite geopolitical tension; however, a stagflationary scenario or monetary easing could drive a renewed rally.

• Diversification into alternative supply chains: Countries are accelerating investment in alternative smelting and refining outside the Gulf. Western governments are encouraging domestic production of critical minerals; the U.S. asked miners to increase output of 13 critical minerals just before the conflict.

• Long-term supercycle possibility: Analysts see structural drivers — global electrification, AI-driven data-center expansion, chronic underinvestment in mining, and geopolitical fragmentation — setting up a potential commodities supercycle. The Hormuz crisis may mark an inflection point that accelerates diversification away from fossil fuels while exposing the mineral intensity of the energy transition.

Conclusion

• Multi-layered shock: The Strait closure triggered simultaneous disruptions to oil, LNG, sulfur, helium and critical-mineral supply chains — a compound shock without modern precedent.

• Aluminum and nickel hardest hit: LME aluminum rallied to near four-year highs and nickel hit a two-year high, with both markets likely shifting into structural deficit through 2026.

• Sulfur as the hidden transmission mechanism: The collapse of Gulf sulfur exports cascaded into battery-metal processing in Indonesia and Africa, threatening nickel, cobalt and lithium output vital to the energy transition.

• Precious metals diverged from base metals: Gold and silver initially rallied then fell sharply as rising real interest rates overwhelmed geopolitical safe-haven demand — demonstrating that macroeconomic factors can override risk premia.

• Supply-chain fragility exposed: Countries importing more than two-thirds of intermediate industrial inputs — from Turkey to Chile — face acute vulnerability; accelerating domestic critical-mineral production is now a strategic imperative.