Aluminum prices fell to their lowest levels in more than two months after the temporary agreement between the United States and Iran paved the way for the resumption of metal shipments through the Strait of Hormuz.

The widely used light-industrial metal dropped 4.4% to settle at $3,379.50 per metric ton on the London Metal Exchange, its lowest level since March 27.

Iran agreement

The United States and Iran have reached a preliminary agreement to reopen the Strait of Hormuz alongside the expected formal signing of the deal on Friday, although final details are still being negotiated.

The conflict with Iran caused significant disruptions to aluminum supplies after metal smelters across the Middle East were hit by missile attacks, while the closure of the strategic waterway disrupted inbound raw-material flows and outbound metal shipments to global markets.

Producers turned to alternative logistics solutions to keep operations running, but the conflict left the industry facing a substantial supply deficit.

“Aluminum prices appear vulnerable in the near term as supply risks fade while concerns over demand remain,” Bank of America analysts led by Michael Widmer said in a note.

They added that Middle Eastern production, which accounts for roughly 10% of global supply, declined 35% year-on-year in April, although part of that loss could be offset by higher output from China, the world’s largest aluminum producer.

Additional pressures on prices

The bank’s analysts also pointed to other bearish factors, including the potential release of Middle Eastern aluminum inventories if the Strait of Hormuz reopens, as well as rising supply from smelters in Indonesia.

US President Donald Trump said on Sunday that he was authorizing the reopening of the Strait of Hormuz “with no transit fees.”

However, Iran’s Fars News Agency, citing an informed source, reported that Iran would permit free passage through the strait for only 60 days.

Even so, shipowners said they need more details before assessing whether commercial navigation can safely resume, while some analysts believe the aluminum industry will continue to struggle to rebuild depleted inventories amid ongoing supply constraints.

China has increased exports since the conflict began, but producers are now facing government-imposed production caps.

Manufacturers have also been drawing down inventories held in exchange warehouses and private storage facilities, and those stockpiles are likely to continue declining as long as Middle Eastern flows remain constrained, according to Gregory Shearer, head of base and precious metals research at JPMorgan Chase.

“If the strait is reopened, we could see a sharp decline in prices because aluminum is closely tied to energy markets,” Shearer said.

“However, we still believe the market is facing a significant supply gap. The key question is how long it will take for invisible inventories to be exhausted before visible inventories begin to be drawn down,” he added.

Bitcoin recovered on Monday, climbing above $67,000 as investor sentiment improved and risk appetite strengthened across cryptocurrency markets following reports of a preliminary agreement between the United States and Iran.

The world's largest cryptocurrency rose 5% to trade above $67,000, recovering from sharp losses suffered over recent weeks as investors responded positively to signs that geopolitical tensions in the Middle East could ease.

The United States and Iran have reached a preliminary agreement that is expected to take effect on Friday.

US President Donald Trump said the agreement would include lifting the naval blockade on Iranian ports and reopening the Strait of Hormuz, one of the world’s most important energy-shipping routes.

The full text of the agreement has not yet been published.

Reports also indicated that the ceasefire agreement reached earlier this year would be extended for another 60 days, giving both sides more time to continue negotiations over Iran’s nuclear program.

At the same time, Iran’s Supreme National Security Council said the US naval blockade would be lifted immediately and that hostilities were expected to stop on several fronts, including Lebanon.

Strategy continues to increase its Bitcoin holdings

In a separate development, Strategy continued to expand its Bitcoin investments.

The company disclosed that it purchased around 1,587 Bitcoin between June 8 and June 14 for approximately $100 million, at an average purchase price of $63,024 per coin.

The purchases were funded through the sale of 1.73 million class A shares under its at-the-market equity offering program, generating net proceeds of about $209 million.

Following the latest purchase, Strategy’s total Bitcoin holdings rose to 846,842 coins.

The company said the total cost of these holdings was approximately $64.07 billion, with an average purchase price of $75,656 per Bitcoin.

Strategy also reported cash reserves of about $1.1 billion as of June 14.

Oil prices dropped more than 2% on Tuesday, hitting their lowest levels in three months as markets evaluated the prospects of renewed energy flows through the Strait of Hormuz, alongside weak physical demand and lingering uncertainty surrounding the preliminary agreement aimed at ending the conflict with Iran.

Brent crude futures fell by $2.02, or 2.4%, to $81.15 per barrel by 10:59 GMT after touching $80.89, their lowest level since March 4.

US West Texas Intermediate crude declined by $2.22, or 2.8%, to $78.53 per barrel after falling to $78.27, the lowest level since March 10.

Oil prices had already plunged about 5% on Monday after US President Donald Trump announced a temporary agreement to end the US-Israeli conflict with Iran, although full details of the arrangement have yet to be disclosed.

Iranian Foreign Minister Abbas Araghchi said on Tuesday that Iran and the United States would begin a new round of negotiations in Switzerland on Friday aimed at reaching a final agreement.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said:

“Downside risks remain in the near term as markets continue to price in a faster reopening of the Strait of Hormuz and the return of stranded oil barrels to global markets.”

However, he added that low inventories, strong seasonal demand, efforts to rebuild strategic reserves, and ongoing geopolitical uncertainty suggest that a return to pre-war oil prices may not be as straightforward as current market optimism implies.

Markets await Hormuz reopening as risks remain

The conflict led to the closure of the Strait of Hormuz, a route that normally handles around one-fifth of global oil supplies.

Since the announcement of the framework agreement, only a limited number of tankers have crossed the strait, although some vessels continued moving oil quietly along Omani waters in recent weeks by sailing without active tracking systems and with support from the US Navy.

Shipping companies are still awaiting assurances regarding safe passage through the strait, including confirmation that naval mines have been cleared.

The US military reportedly supervised dozens of ship-to-ship oil transfers to maintain Gulf energy exports, using aerial and maritime drones as well as helicopters to guide convoys toward waiting tankers.

Initial indications suggest the US-Iran agreement will reopen the strait and extend the ceasefire for 60 days, providing time for negotiations on issues including Iran’s nuclear program.

Some analysts expect oil flows through the strait to resume soon, increasing downward pressure on a market already facing weak physical demand.

Analysts at Morgan Stanley said in a note to clients that several indicators had pointed to weakness in physical oil markets during recent weeks.

Meanwhile, Goldman Sachs lowered its fourth-quarter Brent forecast to $80 per barrel from $90 and cut its 2027 average forecast to $75 from $80, assuming Gulf exports return to pre-war levels by the end of July rather than late August.

In China, crude oil imports fell 29% in May to their lowest level in eight years, extending a sharp downward trend in the world’s largest oil importer. Saudi oil shipments are also expected to decline in July.

Fawad Razaqzada, market analyst at Forex.com, said:

“We have also seen weaker-than-expected Chinese data, suggesting demand from the world’s second-largest economy and one of the biggest oil consumers could be slowing, just as global supply is expected to increase again with the easing of restrictions on Iran.”

Despite the sharp decline in prices, analysts believe volatility risks remain elevated due to the absence of a permanent agreement and continuing uncertainty over the final terms of any broader settlement.

The US dollar held near its lowest level in ten days on Tuesday as risk appetite improved following the announcement of a preliminary agreement to end the conflict between the United States and Iran. Meanwhile, the Japanese yen remained close to the key psychological level of 160 per dollar after the Bank of Japan raised interest rates as widely expected.

US President Donald Trump announced on Monday that Washington and Tehran had reached a preliminary agreement to end the conflict in the Middle East. However, uncertainty still surrounds the temporary deal, while shipping companies warned that restoring confidence could take weeks even after the Strait of Hormuz is reopened.

Investor attention this week is also focused on a series of major central bank meetings around the world.

The Bank of Japan raised interest rates to their highest level in 31 years during Tuesday’s meeting, in line with market expectations. However, the 7-1 vote drew attention from analysts, as it highlighted some division regarding the timing of the next rate increase.

Investors also closely followed comments from Deputy Governor Shinichi Uchida, who said:

“We will monitor economic developments, prices, and financial conditions, with particular attention to the situation in the Middle East. We will assess whether the economy and inflation are evolving in line with our expectations, as well as any potential risks. As underlying inflation approaches 2%, we must remain attentive to upside price risks and conduct monetary policy in a way that keeps pace with developments.”

Derek Halpenny, Head of Global Markets Research for EMEA at MUFG, said:

“Considering everything that was delivered in terms of data, messaging, and Uchida’s comments, I think the outcome was about as hawkish as markets could reasonably have expected.”

He added:

“They clearly emphasized upside inflation risks, reiterated that monetary policy remains accommodative, and confirmed that their forward guidance remains unchanged, effectively leaving the door open for further rate hikes.”

The yen was little changed at 160.26 per dollar, remaining close to the 160 level that traders view as a potential trigger for another round of intervention by Japanese authorities.

Global focus turns to central banks as uncertainty over the Iran agreement persists

Elsewhere, the Reserve Bank of Australia left interest rates unchanged in a unanimous decision after three consecutive rate increases, despite persistent inflation pressures. The Australian dollar slipped 0.1% to US$0.706.

Markets are also awaiting policy decisions from both the Bank of England and the US Federal Reserve later this week.

Despite cautious optimism following the Iran agreement and the sharp decline in oil prices, currency markets have reacted only modestly so far as investors wait for clearer guidance from central bank officials.

The US Dollar Index, which measures the greenback against a basket of six major currencies, was little changed at 99.62.

The euro edged up slightly to US$1.16, while sterling held steady at US$1.3418.

Analysts believe concerns over the normalization of global supply chains will keep investors cautious, especially given the ongoing uncertainty surrounding inflation and interest-rate expectations.

Analysts at ING said market reactions have moved ahead of developments on the ground and could shift depending on the ultimate success of the agreement.

They added:

“A more sustainable repricing requires safe, predictable, and insurable shipping through the Strait of Hormuz. Demand may also remain unusually strong due to the need to rebuild depleted inventories. Escalation risks have diminished, but they have not disappeared entirely.”