London aluminum up 17% as Middle East smelter outages extend conflict's supply impact
Commodity desks including Mercuria, Goldman Sachs and JPMorgan warn that smelter disruptions in the Middle East are driving a sharp repricing in industrial metals.
London aluminum prices have climbed nearly 17% since the onset of the U.S.-Iran conflict, with Mercuria, Goldman Sachs and JPMorgan among the commodity desks warning of a major supply shock driven by Middle East smelter outages, according to reporting from late May 2026. The move extends the conflict's price impact well beyond crude into industrial metals, where disrupted capacity is harder to replace quickly than barrels diverted through alternative shipping routes.3
Smelter outages in the region removed metal from a market that was already contending with tight inventories before the conflict began, analysts said at the time. Desks flagging the shock are the same ones whose models underestimated how persistent the crude disruption would prove.3
Oil markets face a related structural challenge: how to refill storage drained during the Hormuz disruption. As Bloomberg noted in its reporting, the world absorbed the crisis by tapping oil in storage, with China's contribution to relative market balance seen as particularly notable given its role as the world's largest importer.4
The U.S. position is pressing. The Strategic Petroleum Reserve held 331.2 million barrels in the week ending June 19 (2026-06-19), the lowest level in four decades and below where it stood in 2023 after the previous round of drawdowns.4
That storage picture complicates the supply-surge thesis priced into crude. ICE Brent crude front-month settled at $82.38 per barrel as of the August 7 (2026-08-07) close, with NYMEX WTI front-month at $77.08 per barrel. Flat prices have held, but the inventory data points toward near-term imbalance rather than abundance.4
The bearish case is straightforward. If the world met demand by pulling from inventories through the crisis, then a supply return combined with a refill requirement creates an awkward gap. Prices need to stay high enough to incentivize rebuilding stocks, yet high prices also suppress the demand that would justify the rebuild. Those two conditions are difficult to satisfy simultaneously.4
China's behavior during the crisis was opportunistic rather than strategic, traders said. A repeat of that pattern in the refill phase would leave the U.S. SPR as the marginal buyer, a position that historically has not moved the market on its own. The WTI front-month carries a bearish signal tied specifically to the storage overhang.4
Natural gas sits apart from these dynamics. NYMEX Henry Hub front-month settled at $2.66 per million British thermal units as of the August 7 (2026-08-07) close, with the U.S. market oriented around LNG demand growth from Gulf Coast terminals. Comstock Resources, which holds a large acreage position in the Haynesville and runs production that is 100% natural gas, is one of the E&Ps most directly exposed to that demand channel.2 The Zacks Consensus Estimate for Comstock Resources' 2026 earnings per share points to a 37% year-over-year increase, with the firm posting a trailing four-quarter earnings surprise of roughly 56.9% on average, according to Nasdaq data.1
Back in metals, the question for aluminum is whether the smelter outages prove temporary or mark the start of a longer curtailment. Every week of idled capacity removes metal that must eventually be replaced, and the cumulative effect of a two-month, 17% price move is not easily unwound if outages persist.3
The SPR trajectory in coming weekly reports will be the clearest near-term signal for crude. The reserve has been rebuilt before, but not from a base this depleted and not against a market simultaneously pricing in a supply surge. If weekly data show the drawdown continuing rather than flattening, the storage case against higher prices gets harder to dismiss.4