The text below is an edited version of an Insight originally published on CRU Online, dated 3 March 2026. For the full version, contact us here.
The main impact on the ferrous value chain from the Middle East conflict will be higher energy costs in a prolonged scenario. Oil and gas prices are already moving higher and, over time, this will impact steelmaking costs across all regions.
Energy costs are surging due to disruption risk to both production assets and Strait of Hormuz shipping. The latter is also forcing up freight costs, which will affect delivered import prices for the overall ferrous value chain across importing markets. Escalation risk of shipping disruption to the Red Sea will add to this.
Steel long products will be more impacted by higher oil and gas costs compared to flats given their exposure via electricity for EAF-based production (BF-BOF energy inputs are chemical, from coke). Re-rollers and island sites will be also more exposed than assets with local energy generation, for example from BF off-gases.
Other impacts centre on disruption to trade flows in and out of the region.
Iranian exports – largely semis and longs – are at risk
Iran is a major crude steel producer in the Middle East and Africa. Production is predominantly gas-based DRI-EAF. The country has built a significant DRI industry, which leverages domestic gas and iron ore reserves, and it is a key supplier of DR-grade iron ore pellets and DRI in global trade.
Most output is consumed domestically and sanctions make exports challenging, although exports are supported by the country’s comparatively low production costs (for more information, request a demo of CRU’s Asset Platform here). In recent years, the country has exported meaningful steel volumes, most of which were relatively low value-added products such as slab, billet, rebar and hot-rolled strip.
Current disruption in the Strait of Hormuz will cut Iran’s ability to serve export markets further afield, including China and India. Its biggest nearby steel export market, Iraq, is over land and may remain accessible.
In parallel, any disruptions to natural gas or electricity supply in Iran would result in reduced DRI and steel output.
Raw materials markets will see a limited impact
Iran’s iron ore exports are also at risk, with China being a key destination either directly or via regional transhipment hubs. However, the direct impact on the broader iron ore demand-supply balance may be limited.
The Middle East consumes relatively small volumes of metallurgical coke versus other regions, and a significant share of this is imported. The region’s steel production is geared towards the DRI-EAF route, with Iran being the main exception where BF capacity exists alongside coke-making capability. This implies a more limited impact on met coal and coke markets from demand destruction.
Freight risk escalation is a broader threat
On freight, a further risk is escalation to the Red Sea/Suez Canal, which would force widespread rerouting to impact cargoes otherwise unrelated to the Gulf region – often via the Cape of Good Hope – increasing voyage distances and schedule unreliability across container and dry bulk routes.
In October 2023, attacks in the Red Sea forced trade flows to reroute around Southern Africa. This increased shipping costs and lead times, thus raising delivered import prices across multiple markets. The same would happen if such attacks resumed now.
Inbound shipping is also a risk
Shipping disruption threatens not only Iranian exports but also imports into other countries in the Gulf region. Saudi Arabia and the United Arab Emirates, for instance, import significant volumes of steel products, with a sizeable share coming from Asia.
The Middle East is also a key market for DR-grade iron ore pellet and pellet feed, with growing DRI production and domestic pelletising capacity. Infrastructure damage and freight disruptions are likely to weigh on the pellet and high-grade ore market, complicating upcoming price negotiations.
At CRU, we are closely monitoring developments in the markets and keeping our clients updated with comprehensive analysis on what the situation could mean for supply chains, logistics and pricing. Contact us if you would like to discuss the potential implications for your market or commodity of interest.
