Oil is trading around $100 a barrel and everyone’s watching the Strait of Hormuz. Fair enough. But while crude grabs the spotlight, another commodity is quietly setting up for a supply shock of its own: aluminum.
Here’s why it matters. Aluminum production is brutally energy-intensive—it takes huge amounts of electricity to smelt the metal. When oil prices spike, energy costs spike. And when energy costs spike, aluminum production becomes a lot more expensive.
We’ve seen this movie before. In the 1970s, oil shocks forced high-cost aluminum smelters in the U.S., Europe, and Japan to shut down. Supply tightened. Prices surged. The producers with cheap, stable energy cleaned up.
Fast forward to today. The Iran conflict isn’t just choking oil supply—it’s hitting aluminum directly. The Middle East accounts for about 10% of global aluminum production, and Iran’s weekend strikes damaged two major producers: Emirates Global Aluminium in Abu Dhabi and Aluminium Bahrain. Both facilities are offline or operating at reduced capacity.
So who wins? The producers with a structural cost advantage. And that’s where Alcoa (AA) comes in.
Alcoa is the largest U.S. aluminum producer, and it’s powered by something its competitors can’t easily replicate: 87% renewable energy. Most of its smelters run on hydro, nuclear, or other clean sources. That means Alcoa’s costs stay relatively stable even when oil and natural gas prices go haywire.
This isn’t just a cost story—it’s a customer story. Companies like Tesla are increasingly demanding low-carbon aluminum. Alcoa is positioned to capture that premium market while its peers scramble to decarbonize.
The stock has already started moving. After a tariff-induced selloff in early 2025, Alcoa shares have been climbing on aluminum supply concerns. The company beat Q4 earnings estimates and is set to report again on April 16.
At less than 12 times forward earnings—well below its historical average of 20x—Alcoa is still relatively cheap compared to its improving fundamentals. Wall Street has been raising earnings estimates. And with Middle East supply offline, the tailwinds are just starting to build.
Oil may be the headline, but aluminum could be the trade.
