Recently, the outbreak of war between Israel and Iran may impact aluminum prices through various factors, including the energy market, aluminum production and transportation, as well as macroeconomic conditions and market sentiment. Aluminum prices are likely to fluctuate and trend upward. The analysis is as follows:

​1. Rising Energy Costs

Aluminum smelting is an energy-intensive process, requiring significant electricity consumption. Iran is a major producer of oil and natural gas, and a war between Israel and Iran could severely destabilize the Middle East, disrupting oil and gas production and transportation in the region.

As the Middle East plays a crucial role in global energy supply, any conflict-induced reduction in oil and gas supply or transportation disruptions could lead to sharp increases in international oil and natural gas prices. Higher energy costs would directly increase production expenses for aluminum smelters, potentially driving aluminum prices upward due to cost-push inflation.

​2. Supply Chain Disruptions

Iran possesses substantial bauxite resources and aluminum smelting capacity. A war could severely impact Iran’s aluminum production and exports, reducing global supply.

Additionally, the conflict may disrupt port operations and shipping routes in the Middle East. The Suez Canal, a critical global trade artery, could face blockages if the conflict spreads, significantly increasing transportation costs and delays for aluminum products. These supply chain uncertainties would further support upward pressure on aluminum prices.

​3. Safe-Haven Demand and Capital Inflows

Geopolitical conflicts often trigger market risk aversion, prompting investors to shift funds from risky assets to safer ones. However, some capital may also flow into commodities as a hedge against inflation and uncertainty.

As a key industrial commodity, aluminum could attract some safe-haven capital, leading to short-term price increases.

​Conclusion

The Israel-Iran conflict introduces both bullish and bearish factors for aluminum prices. While energy cost increases, supply chain disruptions, and safe-haven demand may push prices up, fears of a global recession and USD appreciation could weigh on the market. Overall, aluminum prices are likely to experience heightened volatility, with a potential upward bias in the near term.