Copper-Aluminum Divergence Unveils The Complex Iran War Impact - Alcoa (NYSE:AA), Antofagasta (OTC:ANFGF)

Four weeks in, the ongoing conflict in the Middle East has evolved into one of the most severe recent energy shocks, according to the International Energy Agency, the International Monetary Fund, and the World Bank. So far, the effects of the crisis are polarizing. Energy and aluminum markets face immediate supply shortages, while the broader macroeconomic shock might paradoxically push industrial metals like copper into surplus. Aluminum Under Pressure Nowhere is the supply shock more visible than in aluminum, where the Strait of Hormuz has emerged as a critical chokepoint. Missile and drone strikes on major producers, including Emirates Global Aluminum and Aluminium Bahrain (Alba), have shut down operations. According to ING, as reported by Bloomberg, roughly 3 million tons of annual capacity -- nearly half of Middle Eastern output -- has been knocked offline. The crisis extends beyond physical damage. The effective closure of the Strait of Hormuz is choking off the flow of alumina, the key input for aluminum smelting. As much as 60% of the region's alumina supply passes through the strait, meaning even intact facilities face looming shortages. The dual shock, lost production, and constrained inputs have sent prices on the London Metal Exchange sharply higher. Aluminum trades around $3,500 per ton, near four-year highs. The Copper Tug-of-War Under this scenario, the copper market could swing from a deficit into a surplus of 100,000 to 200,000 tons. Prices, which recently hovered above $12,000 per ton, could fall below $10,000 as inventories build and consumption weakens. The implications for mining companies are significant. Complicating matters further are rising input costs and supply chain disruptions. Bloomberg Intelligence estimates that energy-driven inflation could lift mining unit costs by 10%-20%. Shortages of sulfuric acid, critical for copper processing, are emerging as a constraint. The situation is critical in the Democratic Republic of Congo, where up to 60% of production depends on sulfur imports from the Gulf. Therefore, the war creates a complex situation in which supply constraints may limit output, but weakening demand could still push the market into a surplus. Image by artemegorovv via Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.