The impact of the US-Iran war on aluminium markets and the European Union’s Response

The escalation in the conflict between the United States (US) and Iran has reverberated across global commodity markets, exposing the fragility of supply chains that underpin modern industry. Among the commodities affected is aluminium, a metal essential for sectors ranging from automotive manufacturing and construction to packaging and renewable energy technologies. For the European Union (EU), the war has created a particularly acute challenge. Already navigating geopolitical tensions, energy transitions and sanctions against Russian metals, Europe now faces a new disruption to its aluminium supply network.

The strategic importance of aluminium

Aluminium is widely regarded as a critical industrial material due to its lightweight properties, corrosion resistance and recyclability. It is used extensively in transportation, aerospace, electronics, construction and energy infrastructure. Because of its importance to manufacturing and the green transition, disruptions in aluminium supply can quickly ripple through multiple sectors of the global economy.

The West’s aluminium supply chain had already been under pressure before the current conflict. Sanctions on Russian metals following the war in Ukraine reduced the availability of Russian aluminium in Western markets, forcing Europe and the US to increase reliance on producers in the Gulf region. As a result, the Middle East has become a critical source of primary aluminium for Western economies.

The outbreak of war involving Iran has therefore struck at the heart of this newly reconfigured supply chain.

Shipping disruptions and supply shocks

One of the most immediate consequences of the conflict has been the disruption of maritime trade routes in the Persian Gulf, particularly through the Strait of Hormuz. This narrow passage is one of the world’s most important shipping corridors for energy and industrial commodities. Since the outbreak of hostilities, shipping companies have reduced traffic through the region following Iranian attacks and warnings against vessel passage.

Also read: The EU-Mercosur Agreement and the positive implications for raw materials and aluminium

For aluminium markets, this disruption is significant. The Gulf region hosts approximately seven million tonnes of smelting capacity, which is around 8% of global aluminium output and a large share of this production is exported to Western markets.

As shipping routes became unstable, several producers in the region declared force majeure or halted operations. Major smelters in Bahrain and Qatar temporarily suspended shipments or production due to security concerns and disruptions in energy supply.

These developments quickly tightened global supply. Benchmark aluminium prices on the London Metal Exchange (LME) surged to near four-year highs, with analysts warning that prices could climb as high as USD 4,000 per tonne if disruptions persist. The price spike reflects both physical supply shortages and rising transport and insurance costs for shipments passing through the conflict zone.

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Europe’s vulnerability

The EU is particularly exposed to these disruptions because of its structural dependence on imported aluminium. Over the past decade, the EU has seen a gradual decline in domestic smelting capacity due to high energy costs and environmental regulations. As a result, European manufacturers rely heavily on imports to meet demand.

Around one-fifth of Europe’s aluminium imports originate from the Middle East and Egypt, making the region a key supplier for the continent’s industrial base.

This reliance has intensified since the EU began phasing out Russian aluminium imports in response to the war in Ukraine. Russian producers had historically been among Europe’s largest suppliers. With those imports declining, Gulf producers became even more central to Western supply chains.

The Iran conflict, therefore, compounds an existing vulnerability. European manufacturers now face rising input costs and potential supply shortages. In addition, the war has driven energy prices higher, further increasing production costs for aluminium smelters and metal processors.

Taken together, these pressures threaten to erode the competitiveness of European industry at a time when it is already confronting competition from lower-cost producers in Asia and North America.

Market volatility and economic implications

The disruption of aluminium supply chains has also triggered wider economic effects across Europe. Investor sentiment in the eurozone has deteriorated as the conflict introduces fresh uncertainty into commodity markets and global trade flows.

Higher aluminium prices translate directly into higher costs for manufacturers. For example, automotive companies rely heavily on aluminium to reduce vehicle weight and improve energy efficiency, while construction firms use the metal in building materials, facades and infrastructure. The packaging and consumer electronics industries are similarly exposed to fluctuations in aluminium prices.

As a result, sustained price increases could contribute to broader inflationary pressures in the European economy. Rising industrial input costs are likely to be passed on to consumers, potentially affecting everything from vehicle prices to food packaging.

The EU’s political and strategic response

In response to the conflict, the EU has adopted a dual approach combining diplomatic engagement and economic risk management. Politically, EU leaders have called for restraint and de-escalation while emphasising the need to safeguard European interests and global trade routes.

European institutions have also intensified discussions on strategic autonomy in critical raw materials and industrial inputs. The war has reinforced the argument that Europe must reduce dependence on external suppliers for key materials such as aluminium.

Several policy responses are now under consideration. These include diversifying supply sources by increasing imports from countries such as Canada, India and African producers, as well as strengthening recycling capacity within Europe. Aluminium recycling requires significantly less energy than primary production, making it both economically and environmentally attractive.

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At the same time, policymakers are examining ways to revive domestic smelting capacity, although this remains challenging due to high electricity prices. Aluminium production is extremely energy-intensive and European smelters often struggle to compete with facilities in regions where energy costs are lower.

Another component of the EU response involves protecting maritime trade routes that are essential for commodity flows. European leaders have discussed strengthening naval missions aimed at safeguarding shipping in strategic waterways such as the Red Sea and the Persian Gulf.

Ensuring the free movement of goods through these corridors is seen as essential not only for aluminium but also for oil, liquefied natural gas and other commodities that underpin the European economy.

A catalyst for industrial policy

Ultimately, the US-Iran war may serve as a catalyst for a broader shift in European industrial policy. The aluminium crisis highlights the fragility of globalised supply chains and the risks associated with geopolitical dependencies.

For the EU, the challenge will be to balance economic efficiency with strategic resilience. Diversifying supply sources, investing in recycling and exploring new domestic production capacity may help mitigate future shocks. In this sense, the current conflict is more than a short-term market disruption. It is a reminder that access to critical industrial materials is increasingly shaped by geopolitics. For Europe, ensuring a secure and stable aluminium supply may now become a central element of its economic and strategic agenda.