The Iran War, a 36-Year Low in Aluminium Stocks, and the New Era of Critical Mineral Vulnerability

Simultaneously, the Strait of Hormuz — a waterway that once carried roughly 10% of global aluminium production — was effectively closed. This blocked exports from Gulf producers to Europe, the US, and Asia, and also prevented the import of bauxite and alumina feedstocks that Gulf smelters rely on .

According to the International Aluminium Institute, Gulf primary aluminium output fell by an annualised 2 million tonnes between February and May 2026 — roughly 3% of global annual production wiped out within months .

With spot physical metal vanishing from the market, manufacturers, traders, and consumers turned to the LME as the supplier of last resort. On-warrant stocks — the metal available for delivery — halved from approximately 440,000 tonnes in January to about 250,000 tonnes by mid-August .

Price Dynamics: Spike, Retreat, and Precarious Equilibrium

The shock sent LME three-month aluminium to a four-year high of $3,787.50 per tonne in early June 2026 . Some analysts at the time forecast prices could break $4,000 per tonne, approaching all-time records .

By late July, however, prices had eased back to approximately $3,170 per tonne — roughly where they were before the war escalation . This partial pullback suggests the market priced in some demand destruction from a slowing global economy and a belief that Gulf production would eventually resume. But the underlying tightness remains severe, with inventories near record lows and new supply from China and Indonesia unable to offset the decline .

Concentrated Holdings: The Single-Entity, Single-Origin Risk

What remains in the LME system is extraordinarily concentrated — a structural red flag for a market that is supposed to be deep and liquid.

• Russian aluminium dominance: Russian-origin metal accounted for 93% of all on-warrant LME aluminium stocks as of May 2026, up from 72% in April . Indian brands, which had been the other major source, were withdrawn en masse by consumers during the crisis .
• One dominant holder: Almost all of that Russian aluminium sitting on LME warrant is reportedly owned by a single entity . This means the effective "available for delivery" pool is not 250,000 tonnes of diverse metal — it is a position controlled by one counterparty, creating acute squeeze risk if that holder chooses not to deliver .

This concentration has been driven not by Russian volumes increasing, but by every other origin being actively withdrawn . As one analysis put it, this is "passive concentration" — and it leaves the market dangerously exposed.

Broader Critical Minerals Risks for the West

The aluminium crisis is a warning that extends well beyond one metal.

Western import dependency: The Gulf region supplied Europe and the US with millions of tonnes of primary aluminium and high-purity alumina. Its sudden loss exposed how little spare capacity exists outside China . The EU classifies aluminium as a critical and strategic raw material under its Critical Raw Materials Act .

Military-grade aluminium: the weakest link: A Pentagon war game held in mid-2025 — months before the Iran war began — simulated a major conflict and concluded that the US aluminium supply chain would "potentially not [hold] up well" . The specific vulnerability was high-purity aluminium, an ultra-refined form essential for fighter jets and armoured vehicles. The US relies on UAE imports for approximately 90% of that metal .

Chokepoint cascade: The Strait of Hormuz closure did not just block finished aluminium. It also blocked the bauxite and alumina feedstocks that Gulf smelters import, creating a self-reinforcing production crash . A single maritime chokepoint threatened an entire critical mineral value chain.

Knock-on industrial impact: Construction, packaging, transport, and green energy — solar frames, EV body panels, battery enclosures — all face cost spikes and material shortages from the squeeze . Consultancy Wood Mackenzie estimated the global market could face a supply deficit of up to 4 million tonnes in 2026 .

Bottom Line

The Iran war turned a previously well-supplied aluminium market inside out in six months. Gulf production collapsed by 2 million tonnes per year, LME stocks were drained to a 36-year low, the remaining deliverable metal is roughly 93% Russian and held by one entity, prices spiked 30% before settling into a precarious equilibrium, and a pre-war Pentagon war game had already flagged exactly this vulnerability .

The episode is a warning for every critical mineral supply chain that relies on a narrow set of producers, single chokepoints, and paper-thin exchange inventories. The question is not whether the next crisis will come — but which metal it will hit.