Aluminum Prices Hit 4-Year High! Middle East Conflict Cuts Supply, Analysts Eye $4,000 Mark

The Middle East conflict is reshaping the global aluminum market landscape. The actual closure of the Strait of Hormuz has caused severe supply disruptions, driving aluminum prices to become the strongest performer among industrial metals in this cycle, currently nearing a four-year high.

Since the outbreak of conflict on February 28, three-month aluminum prices on the London Metal Exchange (LME) have surged up to 10%, closing at approximately $3,370 per ton on Wednesday afternoon, an increase of about 8% from before the conflict. Tensions on the supply side have intensified further after Bahrain Aluminum (Alba), the world’s largest aluminum smelter, announced production cuts, fueling ongoing concerns about global supply shortages.

Metal industry research firm CRU Group warns that, if inventory levels continue to decline and Middle Eastern supply disruptions persist, aluminum prices could rise further to $4,000 per ton.

Supply Side Under Double Shock

The actual closure of the Strait of Hormuz is the core driver behind this round of aluminum price increases. Although aluminum is the most abundant metal in the Earth’s crust, it is indispensable in key sectors such as electronics, transportation, construction, photovoltaics, and packaging. Any disruption on the supply side quickly transmits to prices.

Bahrain Aluminum’s decision to cut production further amplifies the supply shock. The company’s annual capacity is about 1.6 million tons, and this cut amounts to 19%, creating an annual shortfall of roughly 300,000 tons, significantly heightening market concerns over aluminum supply.

CRU Group chief analyst Guillaume Osouf pointed out in a recent report that, if global aluminum demand were not generally weak, LME aluminum prices should be rising more sharply. He also warned, “If the conflict persists, it is highly likely to fundamentally change our outlook for the rest of the year, not only due to the sustained impact on global supply but also potentially exerting a negative drag on demand.”

Limited Institutional Participation, Quiet Short Accumulation

Despite the significant rise in aluminum prices, the market generally believes it will be difficult to replicate the retail investor frenzy seen in silver or copper. Reports indicate that an analyst was “surprised” by retail funds entering this highly industrial commodity.

Institutional participation remains limited. Osouf told CNBC that since the conflict erupted, fund long positions have only slightly decreased since the end of January. In contrast, short positions have been more active — increasing by about 15,000 lots. “This indicates that a considerable number of investors expect prices to retreat from current levels,” he added.

This positioning structure reflects clear market divergence on whether aluminum prices will continue to rise. The duration of supply disruptions will be a key variable in determining the market’s future direction.

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