A Harsh Winter Or Embracing Opportunities?
Mar 26, 2026|
Impact of the US-Iran War on Steel and Its Subsequent Influence on the Market in the Coming Period
The impact of the US-Iran war on the steel industry mainly lies in soaring energy costs, disrupted maritime shipping, diverging regional demand, and mounting global inflation and growth pressure, which will further shape a pattern of rising costs, restructured export structure, diverging product performance, and intensified market volatility over the next 3 to 12 months.
I. Direct and Indirect Impacts on Steel
1. Production Costs: Dual Pressure from Energy and Shipping
Energy costs: Iran controls the Strait of Hormuz, through which around 20% of global crude oil and 30% of seaborne LNG pass. Blockades or conflicts would push Brent crude above $100–110 per barrel and European natural gas prices sharply higher. As a highly energy-intensive industry, steelmaking faces significant increases in fuel and electricity costs, raising global steel production costs by 5%–15%.
Shipping costs: With strait blockades and Red Sea tensions, global shipping is forced to reroute around the Cape of Good Hope. Seaborne freight rates for steel may surge 2–5 times, accompanied by sharp rises in war risk insurance premiums and delivery delays, driving up both export costs and risks.
2. Supply Side: Restricted Iranian Output and Restructured Global Trade
Iranian steel: Iran produces roughly 30 million tons of crude steel annually and exports about 11 million tons, mostly billets, making it a key supplier to the Middle East and South Asia. Warfare would cause power instability, port blockades, and export disruptions, nearly halting Iranian steel exports and widening regional supply gaps for semi-finished products.
Global trade: The Strait of Hormuz handles roughly 10% of global seaborne steel trade. Short-term trade chain disruptions, frozen orders, and rising performance risks are expected.
3. Demand Side: Obvious Regional and Product Divergence
Middle East demand: Conflicts suppress infrastructure and real estate demand in Saudi Arabia, UAE and other countries, weakening demand for rebar, wire rod, and flat steel. However, military industry and post-war reconstruction will boost demand for special steel and structural steel.
Chinese exports: China's steel exports to the Gulf region account for a significant share of its total exports. Short-term shipment disruptions will mainly hit flat steel products. Meanwhile, reduced Iranian exports may benefit Chinese steel billets in gaining market share in the Middle East and South Asia.
Global demand: High oil prices fuel inflation and weigh on manufacturing and consumption, leading to weak overall global steel demand. Structural support comes from military, energy facility repair, and alternative infrastructure projects.
4. Product Performance: Diverging Strengths
Stronger sectors: special steel for military use, oil and gas pipeline steel, steel for energy equipment, and steel billets.
Weaker sectors: flat steel (HRC, galvanized) and construction long products relying on Middle East exports.
Neutral sectors: domestic-oriented long products, stainless steel, and steel pipes.
II. Market Impact Over the Next 3–12 Months (By Stage)
1. Short term (1–3 months): Heightened volatility, cost-driven
Steel prices: Supported by rising costs and supply contraction, steel prices will be easy to rise but hard to fall, with limited upside due to weak demand, showing a pattern of high costs and high volatility.
Exports: Chinese exports to the Middle East face disruptions and will shift toward the Red Sea, Mediterranean, and Southeast Asia.
Shipping and inventories: High freight rates and delays slow down global steel inventory digestion.
Financial markets: Rising inflation expectations delay rate cuts, leading to stock market fluctuations and higher commodity volatility.
2. Medium term (3–6 months): Structural adjustment, diverging demand
Cost moderation: If the strait gradually reopens and oil prices ease, steelmaking costs will edge lower but remain above pre-war levels.
Supply recovery: Iranian capacity and global trade chains gradually repair, improving semi-finished steel supply.
Demand divergence: Construction steel remains weak while special steel stays strong amid gradual infrastructure recovery in the Middle East.
Chinese market: Supported by domestic demand and optimized export structure, domestic steel prices are relatively resilient.
3. Long term (6–12 months): Pattern reshaping, risks and opportunities
Trade pattern: Middle East steel imports diversify toward China, Turkey, and India, raising China's share in billets and flat steel.
Higher cost floor: Elevated energy and shipping costs squeeze steel industry profits and accelerate efficiency and low-carbon transitions.
Demand recovery: Post-war reconstruction releases construction material demand in the Middle East. Easing inflation and looser monetary policy support a gradual recovery in manufacturing and real estate demand.
Market risks: Prolonged conflict may lead to stagflation and weaker steel demand; a quick ceasefire would allow the market to return to fundamentals.
III. Core Conclusion and Outlook
Steel market: Over the next 3 months, expect high volatility, cost-driven prices, and diverging products. Over 6–12 months, structural improvement and gradual demand recovery will emerge, benefiting Chinese billet exports and domestic special/energy steel.
Global market: Elevated energy and shipping costs, persistent inflation, and slowing growth will increase volatility in commodities and equities. Safe-haven assets, oil shipping, and military industrial chains may gain periodic advantages.