Aluminum prices have dramatically fallen following a tentative US-Iran peace agreement, which included a 60-day sanctions waiver for Iran. This development has significantly eased concerns about supply disruptions through the critical Strait of Hormuz, a key shipping lane for aluminum. The London Metal Exchange (LME) cash aluminum bid price dropped to $3,263 per metric ton on June 23, a 4.11% decline from $3,403 per ton on June 22. Similarly, the benchmark three-month aluminum contract also saw its bid price fall to $3,269 per ton from $3,405 per ton, a drop of 3.99%. This decline marks a three-month low, with prices having shed over $390 per tonne from their May peak of approximately $3,655 per tonne.
While the market initially reacted with a significant price surge at the beginning of the Iran conflict, with fears of prices exceeding $4,000 per ton, the impact was blunted by the ingenuity of producers and the swift response to the looming crisis. Middle Eastern and Chinese producers played a role in mitigating the initial shock. However, recent diplomatic progress, particularly the expectation of normalized trade flows through the Strait of Hormuz, has led to one of the sharpest single-session declines in the aluminum market. The LME aluminum price on June 15 fell to $3,418/mt, the lowest since mid-March, and down from its year-to-date peak of $3,854/mt on June 2.
Analysts, including those from ING and AlphaMena, anticipate further downward pressure on aluminum prices if the Strait of Hormuz fully reopens quickly. They suggest a potential 5%-10% correction in the first two to four weeks post-deal, with LME aluminum possibly trading between $2,850-$2,950/mt before stabilizing. While some producers like Maaden might resume pre-war shipping within four to six weeks, others, such as EGA, Alba, and Qatalum, which operated at 30%-60% capacity during the conflict, will face a phased recovery. Full recovery for these, especially if damaged facilities are involved, could take three to six months under optimistic conditions, or even six to twelve months, potentially leading to a tightened market in H2 2026 and supporting prices in the $3,000–$3,200/mt range through year-end if capacity remains offline longer than expected.
Recent market data also shows a slight decline in exchange-registered aluminum stocks, with LME opening inventories falling by 1,500 tons to 313,800 tons on June 23. This 0.48% decrease was accompanied by a 3.13% decline in canceled warrants, indicating a reduction in metal earmarked for withdrawal. Despite short-term price drops triggered by easing geopolitical tensions and a tech-led selloff in broader commodities markets, the structural uncertainty in longer-dated forward contracts suggests the market is not yet fully confident in a durable geopolitical settlement. Investors also mulled hawkish comments from a Federal Reserve official, contributing to a bearish sentiment in commodities more broadly, further impacting aluminum prices.
