The global steel market is facing serious challenges due to the escalation of the situation in the Middle East, which has caused shipping disruptions through the Strait of Hormuz. This strategic waterway plays a key role in supplying Chinese steel to the Gulf countries, and the current escalation poses risks to global supply chains for metal products.
This is reported by Finway
Impact on Export and Logistics
Following the escalation, several Chinese steel exporters have stopped forming new offers for clients in the region, as shipping through the Strait of Hormuz has become problematic. Freight costs are rising, and insurance companies are widely canceling cargo coverage. According to analysts and market participants, the lack of available vessels is limiting exports to countries near the Gulf. This has already forced many suppliers to reconsider their plans and temporarily suspend shipments.
The Strait of Hormuz is vital for the export of Chinese steel, which accounted for about 16% of all overseas sales of metal products from China last year. Experts believe that in the short term, the volume of steel supplies from China to the Middle East could sharply decline, leading to pressure on the domestic market and a decrease in prices.
Potential for Global Changes
The escalation of the conflict in the Middle East could provoke not only a reduction in steel supplies but also disruptions to logistics routes, increases in freight rates, insurance premiums, and production costs. Experts note that the potential absence of Iranian supplies will also significantly impact the availability of steel semi-finished products, as Iran exported an average of about 250,000 tons of billets and slabs per month in 2024.
“Traders from GCC countries note that the closure of the Strait of Hormuz could lead to force majeure claims regarding already booked cargoes. Several buyers from the UAE stated that shipments scheduled for this week have been suspended. Others reported that no new steel contracts are being made as suppliers reassess the risks.”
The Middle East region is becoming increasingly important in the global steel market, particularly due to the growth of production capacities in the Gulf Cooperation Council (GCC) countries and the absence of many regional and international restrictions. This makes the region a significant market not only for China but also for other Asian suppliers.
Disruptions in supply chains are already affecting new contracts: some buyers from the UAE report suspensions of planned shipments, and new agreements are being postponed due to risk reassessment. Such disruptions could also threaten new trade flows to the EU, especially from Saudi Arabia and the UAE, whose metal products enjoy exemptions from European protective measures. In the second half of 2025, about 165,000 tons of Saudi hot-rolled steel and 130,000 tons of hot-dip galvanized steel from the UAE were imported into the EU, but these supplies could be restricted as early as the first half of 2026.
Concerns also remain regarding the potential impact of a broader escalation on transportation through the Red Sea, further increasing risks for global markets.
In addition to steel, the situation may also affect the direct reduced iron (DRI) market, particularly in the EU, where gas-based DRI producers are experiencing rising costs amid increasing prices for liquefied natural gas. If the LNG shortage persists, it will lead to further margin reductions for European producers, while producers in the Middle East may face additional costs due to instability in energy infrastructure.
The cost of freight and insurance also affects the flows of scrap metal and manganese ore to India. Rising logistics costs will contribute to an increase in raw material prices, even if physical supplies remain available.