LME aluminium prices fell by over 5.5% on Friday after Iran said it would keep the Strait of Hormuz open during a 10‑day ceasefire between Israel and Hezbollah. The Strait had been closed since late February after US and Israeli strikes on Iran, and prices had reached a four‑year high last week amid supply disruption.

The Strait then closed again over the weekend, keeping focus on supply risk and transport disruption. The Middle East supplies about 9% of global aluminium output and is an important source for Europe.

Disruption is affecting production as well as shipping, and aluminium is now described as being in a structural deficit. If disruptions continue, upward price risk remains.

Problems at Emirates Global Aluminium’s Al Taweelah smelter, lower output at Alba, and earlier curtailments at Qatalum could remove nearly 3 mtpa of capacity. This is almost half of Middle East production and could widen the global supply deficit to 2Mt.

Smelters are hard to restart once shut, which may keep supply tight. Prices may stay supported even with short‑term swings.

Given the recent volatility, we should position for continued price strength in the aluminum market. The renewed closure of the Strait of Hormuz overrides any temporary optimism from the fragile ceasefire. This sharp reversal suggests the path of least resistance for prices is upward as supply fears dominate.

The market tightness is not just a story; it’s confirmed by data showing LME-registered aluminum inventories dropping below 450,000 tonnes this month, a level unseen in over 15 years. This physical scarcity helped push prices briefly to a four-year high last week, touching over $3,400 per tonne. These fundamentals support the view that recent price dips are buying opportunities.

For the coming weeks, we see value in buying call options to profit from potential price spikes. The geopolitical situation remains highly uncertain, and any further escalation could trigger a rapid move higher. This strategy allows us to capture significant upside while defining our maximum risk to the premium paid.

We should also consider using bull call spreads to reduce the entry cost, as implied volatility has increased. This approach benefits from rising prices but costs less than an outright call purchase, making it a more capital-efficient way to maintain a bullish stance. It is a prudent way to trade when options are expensive.

Looking back at the energy-driven production cuts we saw in Europe throughout 2025, it’s clear how sensitive the market is to supply disruptions. The current situation feels similar to the price shock following the Russian invasion of Ukraine in 2022, which taught us that such deficits have a long tail. We believe the market is underestimating how difficult it is to restart idled smelter capacity once it goes offline.

The potential loss of nearly 3 million tonnes of annual production from key smelters like EGA and Alba is the core of the issue. This alone could widen the global supply deficit to 2 million tonnes. Such a significant shortfall will keep prices supported for the foreseeable future, even with short-term price swings.