⛓️‍💥Straits of Crisis: Comparing Steel Market Impacts – Gulf vs. Asia

Since the outbreak of the US-Israel military action against Iran on February 28, 2026, the global steel market has been navigating uncharted waters. But the central question for industry participants is this: Has the Strait of Hormuz crisis hit Gulf steel markets harder, or are Asian buyers bearing the brunt?

The short answer: Both regions are bleeding, but from entirely different wounds.

1. Physical Supply Shock: Iran’s 15 Mt Void

For Gulf steel markets (UAE, Saudi Arabia, Bahrain, Kuwait, Qatar), the most immediate impact has been direct physical supply disruption.

Iran was a major regional supplier of semi-finished steel — billet, slab, and rebar. Morgan Stanley estimates that war damage has impaired 13–15 million tonnes per year of Iran’s crude steel capacity, equivalent to 24–27% of total Iranian capacity and 41–47% of 2025 estimated output. Before the conflict, Iran exported approximately 10.5 million tonnes of steel annually, with semi-finished products making up the core of its seaborne trade.

The Gulf nations — UAE, Saudi Arabia, and Oman — were the primary destinations for those exports. When Iran’s mills stopped, Gulf buyers lost their closest, most cost-effective supply source overnight.

For Asian markets (Vietnam, India, China), Iran was not a major direct supplier. Vietnam imported negligible volumes from Iran; India sourced some Iranian material but had diversified alternatives. However, Asia faces a secondary supply shock: the loss of Iranian semi-finished exports (roughly 500,000–600,000 tonnes per month of billet and slab) has tightened global supply, pushing up prices for all buyers. Southeast Asia alone faces a 2.3-million-tonne billet supply vacuum.

Verdict: Gulf markets suffer direct physical loss; Asia faces indirect global tightening.

2. Logistics & Cost Shock: Where the Real Pain Lives

This is where the divergence becomes stark.

Gulf markets: The Strait of Hormuz is their lifeline. Over 34,000 ships have been diverted in the first four weeks of conflict【17†L41-L43】. Jebel Ali port — the region’s largest steel gateway — has effectively ceased steel import operations. Over 200 vessels remain backlogged. Maersk suspended all cargo acceptance to and from the UAE, Oman, Iraq, Kuwait, Qatar, Bahrain, and Saudi Arabia on March 2. Carriers introduced War Risk Surcharges of up to $3,500 per container. War risk premiums surged by 1,500% as the London Insurance Market expanded coverage to include the entire Persian Gulf. With the Strait effectively closed, rerouted cargo is being discharged at Red Sea gateways (Jeddah) and then trucked inland, adding $65–125/t to landed costs for eastern industrial zones.

Asian markets: No direct port closures. But the crisis has triggered a global freight cascade. Ocean freight rates from China to the Middle East have surged to $50–60/t, and freight costs from China to Southeast Asia have risen 15–20%. The Baltic Dry Index (BDI) surged to 2,095 points in early April, the highest since March 5. War risk premiums for vessels passing through the Gulf (which many Asian cargoes still must transit) have added $10–15/t per tonne in additional insurance costs. Vietnamese enterprises have been forced to recalibrate production and delivery schedules to cope with surging logistics costs.

Verdict: Gulf markets are front-line victims of logistical paralysis. Asia suffers cost inflation but not physical blockage.

3. Trade Flow Reconstruction: Who Fills the Gap?

In the Gulf: A regional supply vacuum is emerging. Saudi billet prices rose sharply in March due to regional supply constraints and elevated risk premiums. GCC steel trade remains in a “highly uncertain position, with disrupted supply flows and limited trading activity”. The UAE’s domestic steel market, already experiencing long-standing supply shortages, faces further tightening. Iranian-origin cargo is facing enhanced scrutiny at UAE ports, adding another layer of complexity.

In Asia: The crisis has triggered a massive trade “mismatch.” On one hand, Iran’s blocked exports have created a 2.3-million-ton billet vacuum in Southeast Asia. On the other hand, the Hormuz crisis has stalled Chinese flat steel shipments to the Gulf. China’s steel exports to the Gulf region accounted for approximately 11.72% of total exports in 2025 (13.95 million tonnes), meaning a significant volume of Chinese steel destined for the Gulf is now either stalled or being diverted. However, Chinese steelmakers have been accelerating exports to Southeast Asia to fill the Iranian gap — Chinese billet CFR offers to Southeast Asia have risen from $410–420/t to $480–490/t, a cumulative cost increase of 18–22%. India’s domestic steel market has tightened further, with prices rising sharply on low inventories and raw material constraints. The crisis has also pushed Ahmedabad’s steel industry into a sharp decline, with imported steel scrap becoming scarce and local scrap prices rising 30–40%.

Verdict: Gulf markets are supply-constrained and scrambling for alternatives. Asian markets are reallocating trade flows, with Chinese and other suppliers redirecting volumes to fill regional gaps.

4. Vulnerabilities: Who Is More Exposed?

5. Conclusion: Two Markets, Two Pain Points

Gulf markets are facing a triple whammy:

1. Physical supply loss from Iran (13–15 million tpy offline)
2. Logistics paralysis at Jebel Ali and other Gulf ports
3. Cost explosion from freight, war risk premiums, and inland rerouting

Asian markets are facing a different set of pressures:

1. Freight inflation (15–20% on key routes)
2. Global supply tightening as Iranian volume disappears
3. Trade flow reallocation as Chinese mills pivot from Gulf to Southeast Asia

Bottom Line: The Strait of Hormuz crisis has inflicted deeper and more direct damage on Gulf steel markets. For Gulf buyers, the problem is “can we get steel at all?” For Asian buyers, the problem is “can we afford the higher price?”

But neither market is unscathed. The crisis has demonstrated that the global steel trade is more interconnected than many realized — a closure in the Persian Gulf sends ripples to Ho Chi Minh City, Mumbai, and beyond.

For procurement managers in the Gulf: Prioritize route reliability over price. Explore alternative ports (Salalah, Jeddah) and build safety stock now.

For procurement managers in Asia: Monitor Chinese export pricing closely — as Chinese mills fill the Southeast Asian gap, prices will rise further. Lock in CFR pricing early.

For steel exporters: The Gulf’s supply vacuum represents a pricing opportunity — if you can solve the logistics puzzle. Asia remains a volume game, but margins are being squeezed by freight inflation.

📧 Which market are you watching more closely right now?
Email: amy@amyinsights.com
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