Copper bars at a wholesale metal dealer in Mumbai, India, on Thursday, Jan 8, 2026.Photographer: Dhiraj Singh/Bloomberg Photo by Dhiraj Singh /Bloomberg

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(Bloomberg) — Aluminum slumped to a two-month low as a peace deal between the US and Iran laid the groundwork for the resumption of metal shipments through the Strait of Hormuz.

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Prices for the lightweight metal dropped as much as 3.3% in London, as the two sides agreed to an interim deal, with the strait to reopen when the agreement is signed on Friday. Details of the plan are still being negotiated.

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The Iran war caused steep supply losses as Middle Eastern aluminum smelters were targeted in missile attacks and the closure of the vital waterway choked off supplies of incoming raw materials and outbound metal. Producers responded with logistical workarounds to keep plants running, but the war still left the industry contending with a major supply deficit.

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President Donald Trump said he was authorizing the “toll free opening” of Hormuz. Iran will allow free transit through the waterway for only 60 days, Fars news agency reported, citing a person familiar with the matter.

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Still, shipowners say they still need more details in order to assess whether safe transits are possible, and some analysts expect that the aluminum industry will continue to face an uphill struggle in replenishing diminished reserves as other supply headwinds continue.

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China has ramped up exports since the war began, but producers are now running into a government-imposed cap on output. Manufacturers have tapped inventories held on exchange and in private storage, and drawdowns may continue while flows from the Middle East remain constrained, according to Gregory Shearer, head of base and precious metals research at JPMorgan Chase & Co.

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“If the strait does reopen, we could see a knee-jerk drop in prices because aluminum has been highly correlated with energy,” Shearer said. “But we still conclude that the market is facing a major supply gap, and the key question is how much longer it will be before those invisible inventories are depleted, and visible inventories start to be drawn down.”

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Aluminum dropped 3.1% to $3,426 a ton by 10:45 a.m. local time on the London Metal Exchange. All other metals were higher on the bourse, with copper up 0.3% at $13,741.50 a ton, while tin jumped 2.5%.

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—With assistance from Martin Ritchie.

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