- Brent rises to $112/bbl as markets price in tighter supply and rising disruption risk
- Shipping constraints and freight costs sustain pressure across steel and raw materials
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:
Brent crude has risen to around $112/bbl, extending gains as markets reassess supply risks amid continued disruptions linked to the Strait of Hormuz, according to media reports. The sustained rise in prices is also raising concerns around demand destruction, particularly across energy-intensive industries and freight markets, where higher fuel costs could begin to curb consumption and shipping activity.
For nearly four weeks, oil markets have remained relatively resilient despite the loss of an estimated 17.8 million barrels per day of trade flows through the Strait. This muted price response was initially supported by a well-supplied global system, according to media reports.
Market participants indicate that the global oil system has lost much of its shock-absorbing capacity, meaning any additional disruption, whether to pipelines, refining infrastructure, or weather-related supply, could trigger disproportionately sharper price movements.
Shipping activity through the Strait of Hormuz remains severely constrained, with vessel transits running about 95% below pre-conflict levels and averaging only a handful of crossings per day, according to media reports.
This combination of tightening supply buffers and persistent logistical disruption is keeping underlying cost pressures elevated across commodity supply chains, even as the risk of demand-side adjustment begins to emerge.
For India, the impact is visible through elevated freight rates, constrained LNG availability and continued supply chain uncertainty. The rupee remains weak near INR 94 against the US dollar, further increasing landed costs across energy, scrap and raw materials.
Steel
Steel export activity has remained largely subdued, with escalating tensions disrupting key shipping routes, particularly along the Red Sea Suez Canal corridor and the Strait of Hormuz, according to media reports. Higher war-risk premiums, vessel rerouting and longer transit durations are tightening vessel availability and raising freight costs, directly affecting export competitiveness.
The increase in voyage distances and insurance costs is raising effective delivered prices into key markets, reducing the attractiveness of Indian offers.
Domestic markets remain under pressure as mills face elevated input costs while demand remains subdued, compressing margins across secondary steel producers. The inability to fully pass through higher costs is widening the gap between input inflation and finished steel prices. At the same time, rising energy prices and freight costs are beginning to influence procurement strategies, with mills adopting a more cautious approach to raw material buying amid uncertainty over cost visibility.
Ferrous scrap
South Asian imported scrap markets remain cautious, with weak currencies and elevated import costs limiting buying activity, according to media reports. Disruptions affecting nearly 20% of imports have tightened supply, increasing competition for available material. Larger steelmakers are securing cargoes at higher prices, while smaller mills face cost pressures and limited availability.
Indicative HMS (80:20) prices are around $365-370/t CFR, but buying remains selective as mills increasingly shift toward domestic scrap due to poor import viability. Global scrap prices remain supported by rising freight and bunker costs rather than demand, with logistics-driven cost pressures keeping offers firm even as underlying consumption across South Asia remains subdued.
Non-ferrous metals
Aluminium markets remain supported by supply-side constraints, with inventories trending lower and energy-related disruptions affecting production costs. Copper prices have stabilised following recent volatility, though sentiment remains cautious amid geopolitical uncertainty and currency pressures.
Zinc markets continue to face pressure from LPG shortages affecting galvanizing operations, with tighter fuel availability weighing on downstream demand.
Coal and energy
Portside RB2 (5,500 NAR) thermal coal prices at Paradip have increased from INR 10,600/t on 27 February to around INR 11,550/t as of 27 March, reflecting a rise of approximately INR 950/t, or about 9 percent, driven primarily by elevated freight costs and logistics constraints.
Buying activity, however, remains limited, with market participants adopting a cautious stance, which is now capping further upside despite continued cost-side support. Recent price movements indicate that the earlier uptrend has begun to lose momentum.
As a result, the market is transitioning from a freight-driven rally to a plateau phase, where weak demand is offsetting elevated input costs, keeping prices stable at higher levels.
This cost rigidity is feeding into the broader metals value chain, sustaining input pressures for sponge iron and steel producers even as finished steel demand remains subdued.
At the same time, the petroleum coke market has entered a phase of acute volatility, driven by supply disruptions including a major refinery fire in the US Gulf Coast and the Valero outage, according to media reports. These disruptions have tightened supply and pushed CFR India 6.5 percent sulphur coke prices to fresh three-year highs, supported by firm offers and rising freight costs.
Freight and logistics
Freight markets remain under pressure, with dry bulk shipping activity reflecting continued volatility and limited fixture activity, according to market participants. War-risk insurance premiums, rerouting and tighter vessel availability continue to push logistics costs higher, even as some routes see intermittent corrections due to softer crude and cautious demand.
Market participants highlighted persistent uncertainty in freight markets. “The market remains volatile, with minimal fixtures as participants struggle to align on workable levels,” a ship broker said.
Limited vessel availability and longer voyage distances are extending transit times and tightening global shipping capacity. Prices of very low sulphur fuel oil in Singapore remain elevated at $894/t, reflecting sustained bunker fuel demand and risk premiums.
If additional supply disruptions materialise in an already tight system, the absence of a global buffer could amplify price movements, reinforcing cost pressures across steel, raw materials and energy markets in the coming weeks.
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