- Tanker traffic through the Strait of Hormuz faces disruption as geopolitical tensions escalate
- Bunker fuel surge and vessel rerouting push freight and raw material costs higher
How will the ongoing conflict in the Middle East affect the global metals markets? As the US-Israel and Iran war escalates, BigMint presents a lowdown of the impact of this geopolitical conflict on the Indian metals, raw materials and energy markets:
Oil markets remain highly sensitive to developments around the Strait of Hormuz, where escalating geopolitical tensions have disrupted one of the world’s most critical energy shipping corridors. The narrow passage linking the Persian Gulf to global markets carries nearly 20% of global oil and LNG shipments, making it a vital artery for energy trade and a key risk point for commodity supply chains.
The risks are now beginning to spill into metals markets as well. Aluminium Bahrain, one of the world’s largest aluminium smelters, has shut several smelting lines amid the ongoing disruptions, reinforcing concerns that prolonged tensions could begin to affect metal supply chains. The Middle East accounts for roughly 9% of global aluminium output, meaning any sustained disruption to smelting operations in the region could tighten global supply.
Brent crude futures rose toward $103/bbl following the escalation as supply concerns intensified amid continued disruptions to tanker movements through the strait. Traders said concerns over shipping delays, insurance risks and possible military escalation have forced refiners and commodity buyers to reassess logistics routes and cargo schedules.
Despite the tensions, two Indian-flagged LPG carriers successfully transited the strait last week. The vessel Shivalik, carrying more than 46,000 tonnes of LPG from Qatar, cleared the corridor on 13 March, while another tanker, Nanda Devi, also passed through between 13-14 March, providing limited relief to India’s near-term LPG supply concerns.
War-risk insurance premiums for vessels operating in Gulf shipping lanes have surged, while shipowners increasingly evaluate alternative routing to avoid high-risk areas. These adjustments are extending voyage times and pushing freight costs higher across global commodity supply chains.
India has also moved to reduce exposure to potential disruptions through the Strait of Hormuz. The country is expanding LPG import sources to include the United States, Norway, Canada and Russia alongside Gulf suppliers to manage tightening global supply conditions.
India consumes roughly 33.15 million tonnes of LPG annually, with imports historically accounting for nearly 60% of demand from Gulf producers. To safeguard domestic supply, the government has instructed refiners to maximise LPG production and restrict industrial sales while prioritising supply for around 333 million household connections.
Meanwhile, India has accelerated diversification of crude procurement, with nearly 70% of oil imports now sourced from routes that bypass the Strait of Hormuz, helping limit exposure to potential shipping disruptions.
Steel
Shipping disruptions across the Gulf are reinforcing a cost-driven cycle across global steel markets as energy prices, freight costs and raw material prices move higher. The Gulf remains a major destination for Indian steel exports, making shipping disruptions particularly relevant for regional trade flows.
India’s semi-finished steel market showed mixed movements during the week. Domestic billet prices declined INR 50-500/t week-on-week across most regions, although southern and western markets recorded gains of INR 200-1,000/t amid regional demand variations. Procurement activity remained cautious as slow finished steel off-take limited stronger buying.
Sponge iron prices also showed varied trends, with pan-India DRI prices falling INR 100-1,050/t week-on-week across most producing hubs, although some markets including Durgapur and Chennai recorded modest gains.
Export activity has also become more uncertain. Missile and drone threats in the Gulf have prompted vessels to delay sailing or reroute shipments, pushing up marine insurance premiums and freight costs. Several Indian mills have turned cautious, holding back fresh export offers amid volatile logistics conditions.
Ferrous scrap
Global ferrous scrap markets remained firm during the week as tensions around the Strait of Hormuz pushed freight and insurance costs higher, tightening supply flows across major import markets. US-origin HMS (80:20) was heard workable near $375/t CFR, later firming to $375-380/t as freight costs increased.
In South Asia, Pakistan booked around 14,500 tonnes of shredded scrap at $400-415/t CFR Qasim, while Bangladesh reported HMS trades near $370/t CFR with offers moving above $380/t.
Indian scrap sentiment remained firm but trading activity was limited. Imported UK/EU-origin HMS (80:20) was indicated near $360-365/t CFR, while shredded scrap offers ranged around $385-390/t and PNS around $390-395/t.
Freight costs rose sharply during the week, with bulk vessel freight increasing to roughly $55-60/t from about $40-45/t earlier, while container freight climbed to $60-65/t, reflecting higher bunker fuel prices and insurance costs.
Supply pressures are also emerging in scrap processing. LPG shortages in Gujarat have prompted processors to explore alternative cutting gases such as dissolved acetylene to maintain operations.
Non-ferrous metals
Aluminium
Aluminium markets remain sensitive to developments in the Middle East because the region accounts for roughly 9% of global aluminium supply. Any disruption to smelting operations or energy supply in the Gulf can therefore influence global availability and prices.
Aluminium Bahrain, one of the world’s largest aluminium smelters, announced the shutdown of three smelting lines representing about 19% of its production capacity in order to maintain operational continuity amid ongoing disruptions linked to the Strait of Hormuz tensions.
LME aluminium closed around $3,486/t on 13 March, while exchange inventories declined slightly to roughly 445,300 tonnes, indicating tightening availability.
In India, domestic ingot offers were heard around INR 350,000-352,000/t ex-Delhi, while aluminium scrap prices also remained firm amid supply constraints.
Hindalco Industries has temporarily suspended sales of extruded aluminium products and invoked force majeure on some contracts due to disruptions linked to the Iran conflict.
Copper
Copper markets have seen limited direct supply impact from the conflict. LME copper traded around $12,780/t, down nearly 3% week-on-week as rising exchange inventories and cautious buying weighed on prices.
Market participants note that the Middle East is not a major copper producer, meaning the conflict has mainly generated sentiment-driven volatility rather than fundamental supply disruptions.
Zinc
Reduced LPG availability in India is also affecting galvanizing operations. Zinc dross prices rose INR 5,200/t week-on-week to INR 269,700/t ex-Delhi, while zinc oxide increased INR 5,400/t to INR 259,800/t amid tighter feedstock supply.
Primary SHG zinc ingot prices were assessed around INR 331,000/t ex-Delhi, while LME zinc cash prices stood near $3,270/t.
Coal and energy
Energy markets remain the primary transmission channel through which the Middle East conflict is affecting metals supply chains.
Higher crude prices and shipping risks are feeding directly into raw material markets. Premium hard coking coal prices delivered to India rose roughly $9/t week-on-week, supported by higher vessel freight costs.
Domestic thermal coal prices have also firmed amid stronger import costs, while delivered prices of high-sulphur petcoke remain around $150-155/t CNF India.
Freight and logistics
Freight markets have become one of the most immediate pressure points across global commodity supply chains. Very low sulphur fuel oil prices in Singapore, the benchmark marine bunker fuel, surged from about $515/t at the end of February to $1,085.50/t on 12 March and further to $1,120.50/t on 13 March as maritime risk premiums escalated.
Because bunker fuel accounts for up to 60% of vessel operating expenses, the spike in marine fuel prices is pushing freight rates higher across bulk commodity shipments including iron ore, coal and steel products.
Missile and drone threats across Gulf shipping lanes have prompted some vessels to delay departures or reroute shipments away from high-risk areas near the Strait of Hormuz and parts of the Red Sea.
These disruptions are raising landed raw material costs and increasing supply uncertainty across metals supply chains. If tensions persist or escalate further, freight volatility, energy price swings and tighter fuel supplies could continue shaping metals markets in the coming weeks.
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