Rising conflict risk in the Middle East has led ING to raise its aluminium price forecasts. ING set out three disruption scenarios linked to shipping through the Strait of Hormuz, including one where prices briefly move above $4,000 per tonne before demand falls. The Gulf produces about 9% of global aluminium and a larger share of internationally traded metal. The region produces about 3% of global alumina and about 1% of bauxite, so smelters depend on imported raw materials. Scenario 1 assumes a short shipping disruption of about four weeks. Exports are delayed, some metal builds up on site, and output at Qatalum recovers slowly after a controlled shutdown. Scenario 2 assumes shipping constraints last for several months. Seaborne supply tightens further, and minor production cuts are possible if deliveries of raw materials remain restricted. Scenario 3 assumes a more severe disruption lasting about three months. ING describes a mix of lost production, stranded metal and wider logistics issues that could tighten availability and push prices briefly above $4,000 per tonne. We see significant upside risk for aluminum as conflict in the Middle East threatens the Strait of Hormuz, a critical shipping lane. With LME warehouse stocks hitting a two-year low of just 485,000 tonnes last week, any supply disruption will have an outsized impact. The current LME cash price of around $3,150 per tonne reflects this growing anxiety. The Gulf region is responsible for about 9% of global aluminum production, but its smelters are heavily dependent on imported alumina and bauxite. This reliance creates a major vulnerability, as any shipping delays directly threaten production continuity. We saw this begin to play out in the final quarter of 2025 when initial freight insurance costs started to climb. Given the potential for a rapid price spike, buying call options on LME aluminum futures for the coming months is a prudent strategy. This provides direct exposure to the upside while capping the maximum loss at the premium paid. A move towards the severe disruption scenario, where prices could briefly top $4,000/t, would make these positions highly profitable. We should remember the price action following the conflict in Ukraine back in 2022, when aluminum surged to a record high above $4,070/t on supply fears. The current situation with the Gulf’s concentrated production presents a similar, if not more acute, logistical chokepoint. Recent naval skirmishes reported near the strait last month only add to these historical parallels. We anticipate implied volatility will continue to climb, making selling puts a riskier strategy but buying straddles potentially attractive for those expecting a large price move. Traders should also watch the cash-to-three-month spread, which we expect to widen further into backwardation from its current $45/t level as consumers scramble for immediate supply. This indicates a very tight physical market.

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