Why are aluminium prices and metal stocks tumbling after easing of West Asia tensions?

Aluminium prices and shares of major metal producers came under sharp pressure on Monday after easing tensions in West Asia reduced fears of supply disruptions. The prospect of smoother shipments from Gulf producers triggered a selloff in the metal, dragging down stocks such as NALCO, Vedanta Aluminium and Hindalco Industries.

US-Iran agreement

Aluminium prices settled 4.92% lower at 356.8 after reports of a framework agreement between the US and Iran to end hostilities and reopen the Strait of Hormuz, a key shipping route for global metals and energy trade.

According to Kedia Advisory, the easing of geopolitical tensions prompted investors to unwind positions as the risk premium built into aluminium prices over recent months began to dissipate.

US President Donald Trump announced that the agreement with Iran had been finalized, adding that the Strait of Hormuz would reopen and the blockade of Iranian ports would end. Iran also confirmed that an immediate end to the conflict had been declared.

Middle Eastern producers account for nearly 9% of global aluminium supply, and the reopening of the waterway is expected to improve exports from the region.

Three-month low

The benchmark three-month aluminium contract on the London Metal Exchange (LME) fell more than 4% to $3,379.50 per metric ton. During the session, prices touched $3,357 per ton, their lowest level since late March.

Market participants believe improved logistics and increased availability of Gulf supplies could exert further downward pressure on prices.

The decline in aluminium prices also triggered losses in Indian metal stocks.

National Aluminium Company (NALCO) shares fell nearly 6%, while Vedanta Aluminium dropped 5% and hit the lower circuit. Hindalco Industries lost more than 3%, making them among the biggest drags on the Nifty Metal index.

NALCO shares closed at Rs 366.65, down by 4.11 %, Hindalco shares closed at Rs 982.40, down by 3.11 % and Vedanta Aluminium Metal shares closed at Rs 471.11, down by 5.00%.

MUST READ: Vedanta no longer in MSCI Global Standard Indexes from this date — Here's what happened after demerger

Supply-side challenges

Despite the sharp correction, several supply concerns continue to support the broader outlook for aluminium.

Norsk Hydro recently declared a second force majeure on aluminium sales from its Qatalum joint venture in Qatar following the termination of a marketing agreement.

Harshal Dasani, Business Head at INVasset Portfolio Management Services (PMS), said the recent decline has brought the market to a more balanced position.

"The aluminium complex sits in a more balanced setup after the recent correction across both the underlying metal and the listed equity exposure. The structural drivers that anchored the bull case have not changed materially," he said.

Production challenges also remain across the Gulf region. Emirates Global Aluminium's flagship smelter is expected to take up to a year to return to full capacity, while Bahrain's ALBA continues to operate below normal levels. Meanwhile, Guinea's tighter controls on bauxite exports have raised concerns about raw material supplies.

MUST READ: Vedanta Power share price: Why did the stock jump nearly 5% today?

Long-term demand

According to Dasani, the fundamental demand outlook for aluminium remains strong.

"Electric vehicle battery casings, solar panel frames, high-voltage transmission, AI data centre demand, and a gradual recovery in Chinese property completions remain intact, while supply discipline through Chinese smelter caps and slow capacity additions outside China also holds," he said.

China continues to drive market activity. The country's unwrought aluminium and product exports rose 5.68% year-on-year in May to 632,000 tonnes, while exports during the first five months of 2026 increased 10.4%. Domestic production in April rose 3.1% to 3.87 million tonnes.

MUST READ: Gold, silver rates on June 16, 2026: Check latest prices for 24K, 22K, 18K in Delhi, Mumbai, Chennai, Kolkata

For investors

Dasani said much of the long-term optimism had already been priced into aluminium.

"What has changed is the price-implied expectation. A meaningful share of the structural case had been priced in at the highs, and the recent correction has reset some of that positioning excess without altering the long-cycle picture," he said.

He added that neither the bullish nor bearish case currently dominates.

"Risk-reward is balanced; the variables to watch are Chinese stimulus cadence, energy costs, and inventory data. Patience over directional conviction is the right stance," Dasani said.

J.P. Morgan remains constructive on aluminium, forecasting prices to average $3,750 per metric ton in the second half of the year and eventually approach the $4,000 mark.

MUST READ: Can Gold EGRs challenge Gold ETFs and sovereign gold bonds?