CITIC Construction Investment: U.S.-Iran Conflict Erupts Driving Precious Metals and Aluminum Higher

CITIC Securities Research Report: After the Spring Festival holiday, besides gold and tin experiencing significant gains driven by geopolitical factors, domestic non-ferrous metals are mostly waiting for further downstream consumption signals in a volatile manner. On one hand, downstream industries are gradually returning after the 15th day of the lunar new year, and inventory turning points will become clearer; on the other hand, the outbreak of US-Iran conflict is expected to boost safe-haven demand, pushing precious metal prices higher. Meanwhile, about 7 million tons of electrolytic aluminum from six Middle Eastern countries, especially Iran’s nearly 800,000 tons, face dual threats of raw material input and finished product output. Global aluminum inventories are weak against shocks, and aluminum prices are trending upward.

CITIC Securities: US-Iran Conflict Sparks Rise in Precious Metals and Aluminum

After the Spring Festival holiday, besides gold and tin experiencing significant gains driven by geopolitical factors, domestic non-ferrous metals are mostly waiting for further downstream consumption signals in a volatile manner. On one hand, downstream industries are gradually returning after the 15th day of the lunar new year, and inventory turning points will become clearer; on the other hand, the outbreak of US-Iran conflict is expected to boost safe-haven demand, pushing precious metal prices higher. Meanwhile, about 7 million tons of electrolytic aluminum from six Middle Eastern countries, especially Iran’s nearly 800,000 tons, face dual threats of raw material input and finished product output. Global aluminum inventories are weak against shocks, and aluminum prices are trending upward.

Industrial Metals: This week, LME prices changed by +2.6% for copper, +1.3% for aluminum, -0.3% for lead, -2.2% for zinc, and +24.7% for tin. The prices of industrial metals are jointly determined by their “financial attributes” and “commodity attributes.” From a financial perspective, the Federal Reserve has begun a rate-cutting cycle; from a commodity perspective, global copper and aluminum inventories remain relatively low. China’s economic recovery is expected, and combined with the growth driven by the new energy sector, demand for copper and aluminum is expected to improve.

US-Iran Conflict Sparks Rise in Precious Metals and Aluminum

(1) US-Iran conflict outbreak: On February 28, 2026, Israel launched a preemptive strike against Iran, followed by the US declaring a “major combat operation” and conducting large-scale airstrikes, marking an escalation from long-term confrontation to direct military conflict. On March 1, 2026, Xinhua News Agency, citing Iranian media, reported the death of Iran’s Supreme Leader Khamenei. CCTV reported that Iran announced a 40-day national mourning starting from March 1.

(2) Safe-haven demand boosts precious metals prices. During the Spring Festival, tariffs re-emerged in the US, and signs of stagflation appeared in the US economy, pushing gold prices above $5,000 per ounce. Tensions in Iran escalated, geopolitical conflicts increased safe-haven demand, further driving gold prices higher. According to the latest World Gold Council report, global physical gold ETF inflows reached $18.7 billion in January 2026, a monthly record. Central banks purchased just over 860 tons of gold in 2025, below the over 1,000 tons per year in the previous three years, but the buying pace remains high. In the medium to long term, rising global debt and fiscal constraints increase sovereign credit risks, and geopolitical uncertainties along with the diversification of the international monetary system lay a solid foundation for higher precious metal prices.

(3) Iran’s electrolytic aluminum production and transportation may be threatened. According to Aladdin (ALD), Iran has about 800,000 tons of electrolytic aluminum capacity, but actual annual production is around 630,000 tons, constrained mainly by power shortages and reliance on imported raw materials. Iran’s domestic alumina capacity is only about 250,000 tons annually, with a deficit of over 1 million tons, relying on imports from South Asia and other regions. In terms of consumption, Iran’s downstream aluminum processing consumes about 300,000 tons of aluminum ingots domestically, with another 300,000 tons exported for foreign exchange. Additionally, the six Middle Eastern countries have over 7 million tons of electrolytic aluminum capacity, including Iran’s 804,000 tons, Saudi Arabia’s 900,000 tons, the UAE’s 2.69 million tons, and Bahrain’s 1.6 million tons. The total alumina capacity of these six countries is only 4.55 million tons, with a gap of about 9 million tons relying on imports. An escalation of US-Iran conflict could impact aluminum supply by threatening Iran’s production and the stability of Middle Eastern countries’ output, especially if maritime shipping routes are blocked, preventing alumina imports and aluminum exports, leading to a global aluminum shortage. The latest global electrolytic aluminum inventory stands at 1.62 million tons, with limited capacity to withstand supply shocks. The US-Iran conflict is likely to drive aluminum prices higher.

1. The global economy is experiencing a significant downturn, with consumption collapsing sharply. The World Bank’s latest “Global Economic Outlook” lowered the 2025 global growth forecast from 2.7% in January to 2.3%, with nearly 70% of economies experiencing downward revisions. The report states that global economic growth is slowing due to trade barriers and uncertain global policy environments. Compared to six months ago, when a “soft landing” seemed possible, the current outlook indicates renewed turbulence. Without a correction in direction, living standards could be severely impacted. Economic data already show signs of decline, and a deep recession would have a huge negative impact on non-ferrous metal consumption.

2. US inflation is out of control, the Federal Reserve’s monetary tightening exceeds expectations, and a strong dollar suppresses equity asset prices. The US has been unable to effectively control inflation, continuing to raise interest rates. Despite significant rate hikes, services like rent and wages remain sticky, restraining inflation from falling. If the Fed maintains high-intensity rate hikes, it will be unfavorable for dollar-denominated non-ferrous metals.

3. Domestic new energy sector consumption growth is below expectations, and the real estate sector remains sluggish. Although policies to loosen restrictions on property sales have been implemented to some extent, residents’ willingness to purchase remains low, and the resolution of debt risks for property developers is progressing slowly. If sales do not improve, there is a risk of stalled construction in the future, which could negatively impact consumption of some domestic non-ferrous metals.

(Source: People’s Financial News)