Middle East conflict disrupts metals markets, threatens global supply: Wood Mackenzie

The conflict in the Middle East is disrupting global metals and mining supply chains, threatening supplies of key industrial inputs and driving up costs across commodities markets, consultancy Wood Mackenzie said in a report released on Thursday.

The report, titled “The ripple effect: How conflict is impacting global metals & mining,” said the escalation of tensions in early 2026 had disrupted shipping through the Strait of Hormuz and damaged regional metals processing capacity, creating knock-on effects for global markets.

The Middle East is a major supplier of industrial inputs including sulphur, liquefied natural gas (LNG), petroleum products and chemical feedstocks used by the mining and metals industries.

“What begins as an operational disruption in the Middle East is becoming a structural cost and supply chain challenge for global metals and mining markets with primary, secondary and tertiary impacts,” Tony Knutson, Wood Mackenzie’s Global Head of Thermal Coal Markets, said in the report.

Major shipping companies including Maersk and Hapag-Lloyd have suspended operations in the Persian Gulf, while vessel arrivals through the Strait of Hormuz have sharply declined, the consultancy said.

Wood Mackenzie estimated more than 110 million barrels of oil are now held in floating storage, while regional producers have shut in around 11 million barrels per day of output.

The disruptions have driven higher fuel and shipping costs, squeezing margins for mine operators and smelters worldwide, it said.

The consultancy highlighted growing pressure in the sulphur market, where prices had already surged to around $550 per metric ton by the end of 2025 due to strong demand from Indonesia’s high-pressure acid leaching (HPAL) nickel sector, fertiliser demand and Russian export restrictions.

Prices rose further after the conflict began, threatening about half of global seaborne sulphur supply and leaving Indonesian HPAL operators facing tightening inventories and rising costs.

Indonesia’s HPAL industry accounted for the largest share of nickel-linked sulphur demand globally, with more than 75% of the country’s granular sulphur imports sourced from the Middle East in 2025, Wood Mackenzie said.

“Major producers are slowing output and stepping back from long-term contracts as shortages loom. The sector’s rapid expansion has left it heavily exposed to this disruption,” Alina Zhunussova, Principal Nickel Analyst at Wood Mackenzie, said.

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The consultancy also warned of broader economic risks if the conflict persists.

Wood Mackenzie cut its global GDP growth forecast for 2026 to 2.3% from 2.5% previously, citing persistent inflationary pressures, delayed interest rate cuts and a stronger U.S. dollar.

In aluminium, the consultancy estimated the Middle East could lose up to 3.5 million metric tons of production in 2026 after disruptions at major facilities including Emirates Global Aluminium’s Al Taweelah plant in the United Arab Emirates and Aluminium Bahrain (ALBA).

Global aluminium supply is expected to shrink by nearly 3% this year despite increased output from Chinese and Indonesian smelters, it said.

In steel markets, crude steel production in the Middle East fell 33% in March, while Iranian steel output dropped 55%, according to the report.

Wood Mackenzie said shortages of direct reduced iron (DRI) and pellets had pushed steelmakers toward ferrous scrap and billets, lifting raw material costs and steel prices globally.

The copper market has so far seen only limited direct impact because disrupted Iranian supply accounts for less than 1% of global production, the consultancy said. However, it warned that higher fuel and sulphuric acid costs could create greater pressure later this year.

The Democratic Republic of Congo, which relies on Gulf supplies for more than 90% of its Copperbelt acid demand, remained particularly vulnerable, with spot acid prices already rising to between $1,000 and $1,400 per ton, the report said.

Wood Mackenzie also said disruptions to Iranian zinc concentrate exports could tighten supply in China, where Iranian material accounted for more than 5% of imports last year.

Even if the conflict ends immediately, disruptions to supply chains and elevated structural costs are likely to persist for months, the consultancy said.

“Integrated producers with localised or secure input streams will remain resilient, while operations dependent on long-distance, high-exposure maritime feedstocks face persistent supply constraints and volatile margins,” Knutson said.

Editing Reiner Simanjuntak