Middle East conflict disrupts major metals and mining markets, threatening global supply and prices

Wood Mackenzie's latest report “The ripple effect: How conflict is impacting global metals & mining” shows that the Middle East conflict, which escalated in early 2026, is driving cascading disruptions across global metals and mining supply chains. The Strait of Hormuz’s closure and damage to regional metals processing capabilities precipitates wider knock-on effects to markets and costs. 

The region is important for exports of critical industrial inputs, including seaborne sulphur, liquefied natural gas (LNG), petroleum and chemical feedstocks. “What begins as an operational disruption in the Middle East is becoming a structural cost and supply chain challenge for global metals and mining markets with primary, secondary and tertiary impacts,” said Tony Knutson, Global Head Thermal Coal Markets at Wood Mackenzie. 

Key mining and metals inputs under strain 

Major shipping lines, including Maersk and Hapag-Lloyd, have suspended Persian Gulf operations. Vessel arrivals through the Strait of Hormuz have collapsed as a result. More than 110 million barrels of oil now sit in floating storage, while regional producers have shut in roughly 11 million barrels per day. Buyers are rerouting supply chains at speed and at considerable cost. 

Escalating structural costs 

What began as immediate operational shocks has evolved into a persistent cost challenge. Mine operators and smelters worldwide face steep inflation from oil price spikes, surging diesel costs and volatile bunker fuel pricing. These pressures are eroding margins with few parts of the metals and mining supply chain remaining insulated. 

The sulphur market has experienced sharp price swings in recent years, with prices peaking at US$550 per tonne (t) by end-2025. This surge was driven by rapidly growing demand from Indonesia’s HPAL sector, strong fertiliser demand, and late-2025 supply constraints, including Russia’s export restrictions. While prices eased briefly afterward, they surged sharply once the Middle East conflict started. Now nearly three months into the conflict, the ongoing disruption continues to threaten roughly 50% of global seaborne supply, leaving Indonesian HPAL operators facing depleting inventories and rising costs. 

Global economic slowdown risk with longer lingering conflict 

Prior to the conflict, the global economy was holding steady, with Wood Mackenzie's Q1 2026 GDP forecast at 2.5% and rising manufacturing PMI signalling positive industrial activity. The escalation has since driven that forecast down to 2.3% in our Q2 assessment, with persistent inflationary pressures, delayed interest rate cuts and a stronger US dollar posing further downside risk to demand. 

How the conflict affects individual metals markets 

Aluminium 

According to Charvi Trivedi, Principal Analyst at Wood Mackenzie, “the Middle East is on track to lose up to 3.5 million tonnes (mt) of aluminium production in 2026, and the gap left behind is too large for the rest of the world to fill.” Key facilities — including EGA Al Taweelah in the UAE and ALBA in Bahrain — have lost major capacity following power plant damage, emergency shutdowns and airstrikes. Chinese and Indonesian smelters are accelerating output to capture lost market share. Even so, global supply is on track to contract by nearly 3% this year. 

Steel and iron ore 

In the Middle East, crude steel production plunged 33% in March, while Iran’s mills saw output collapse by 55%. As pellets and DRI have become harder to secure by sea, steelmakers have turned to ferrous scrap and billets, pushing their prices steadily higher over the past two months. “The pressure does not stop there, as rising iron ore and metallurgical coal costs lifted BOF production expenses by nearly 10% since the start of the year, while EAF producers faced scrap cost increases of 10–15%. Steel prices climbed in response, though each region felt the impact differently,” said Isha Chaudhary, Director Research at Wood Mackenzie. 

Copper 

“The 2026 Gulf conflict has had only a minor direct impact on the global copper market. The loss of Iranian output and disruption to Gulf semis exports totals well below 1% of global supply, making it largely immaterial at the global level,” said Charles Cooper, Head of Copper Research at Wood Mackenzie. While NICICO smelter shutdowns and blocked semis exports are regionally disruptive, the broader market is absorbing these shocks, supported by elevated copper and gold prices. Near-term effects remain limited, but risks are likely to build later in the year as higher fuel and sulphuric acid costs feed through. The key vulnerability lies in the Democratic Republic of Congo (DRC), which depends on the Gulf for over 90% of its Copperbelt acid supply. Spot acid prices have already surged to US$1,000–1,400/t, eroding inventories and hitting smaller, import-dependent operators hardest. 

Nickel 

Indonesia's high-pressure acid leaching (HPAL) sector has become the largest global driver of nickel-linked sulphur demand. More than 75% of Indonesian granular sulphur imports originated from the Middle East in 2025, creating acute physical supply bottlenecks. “Major producers are slowing output and stepping back from long-term contracts as shortages loom. The sector's rapid expansion has left it heavily exposed to this disruption,” said Alina Zhunussova, Principal Nickel Analyst at Wood Mackenzie. 

Zinc and lead 

Disrupted ocean freight out of the Gulf has the potential to curtail Iranian zinc concentrate flows to China, which accounted for over 5% of China's total zinc concentrate imports in 2025. Although some shipments are believed to be getting through, this added concern for concentrate supply has exacerbated fears for an already tight concentrate market, adding downward pressure on Chinese spot treatment charges, which have moved into negative territory. “The disruption is modest in global terms, but its speed underlines the fragility of concentrated trade routes. Smelters are watching the situation closely as the supply gap widens, complicated by incidents at two plants elsewhere in recent weeks,” said Jonathan Leng, Principal Analyst Zinc Markets at Wood Mackenzie. 

Even if the conflict ends today, resolving disruptions across global supply chains will take months. Elevated structural costs will persist well beyond any ceasefire. Wood Mackenzie expects a clear divergence to emerge across the industry.  

“Integrated producers with localised or secure input streams will remain resilient, while operations dependent on long-distance, high-exposure maritime feedstocks face persistent supply constraints and volatile margins,” said Knutson.