The ongoing conflict between the United States and Iran has triggered significant disruptions in global energy and metals markets, with both oil and aluminium prices experiencing sharp increases. According to ING analysts, Iranian attacks on Emirates Global Aluminium’s Al Taweelah smelter and Aluminium Bahrain’s plant have intensified supply risks for aluminium. EGA, the Middle East’s largest aluminium producer, stated that a full resumption of production at its Al Taweelah smelter could take up to 12 months following the attack at the end of last week [1]. Combined outages at EGA, Alba, and earlier curtailments at Qatalum are estimated to take around 3 million tonnes per annum (mtpa) of capacity offline, nearly half of Middle East aluminium production, resulting in a supply deficit of approximately 2-2.5 million tonnes [1]. LME aluminium prices have risen over 10% since the start of the Iran war, reflecting a rising geopolitical risk premium and concerns over sustained tightness in supply [1].
On the oil front, Brent crude has climbed above $111 per barrel as the Iran conflict continues, with President Donald Trump linking any ceasefire deal to the reopening of the Strait of Hormuz for free oil traffic [2][3]. Commerzbank analysts note that OPEC+ has agreed to a modest quota hike of 206,000 barrels per day for May and has expressed concern over attacks on energy infrastructure [2]. The International Energy Agency (IEA) has warned countries against hoarding fuel during the Iran war [2]. According to NBCBusiness, U.S. crude oil prices jumped more than 4% to $116 per barrel, while international Brent crude rose to nearly $111 per barrel [3]. The U.S. launched new strikes on Iran's Kharg Island, which exports about 90% of Iran's crude oil, but officials confirmed that Tuesday's strikes targeted military facilities and did not impact energy infrastructure [3].
Stock markets reacted negatively to the escalating tensions, with the S&P 500 falling 0.4%, Nasdaq Composite dropping 0.8%, Dow declining by 275 points (0.5%), and the Russell 2000 index down 0.4% [3]. Retail gasoline prices averaged $4.14 per gallon, and diesel fuel prices reached $5.64 per gallon, nearing the 2022 all-time high of $5.82 [3]. President Trump has threatened to strike key infrastructure if a deal is not reached by his 8 p.m. ET deadline, stating that free oil traffic through the Strait of Hormuz must be part of any agreement [2][3]. However, market participants are closely watching Trump's statements, as he has previously extended deadlines and paused strikes, leading to volatility in oil prices [3].
Analyst commentary from BlackRock highlights that oil prices remain the key driver as investors grapple with a broadening supply shock and hopes for de-escalation [3]. Bespoke Investment Group notes that risk appetite is subdued ahead of the President’s deadline, while Société Générale analysts see two possible outcomes: a fragile détente or continued escalation [3].
CONCLUSION
The conflict in the Middle East has led to substantial supply disruptions in both oil and aluminium markets, driving prices sharply higher and increasing volatility. With key infrastructure at risk and diplomatic uncertainty persisting, investors remain cautious, and market sentiment is negative. The situation continues to evolve, with further price movements likely dependent on the outcome of ongoing negotiations and potential escalation.