Recent air attacks on major steel-making facilities in Iran have interrupted production at two of the country's largest plants, according to a Barclays equity research note. The targeted sites - Mobarakeh and Khuzestan - have seen operations disrupted, and Tehran has threatened retaliatory strikes against steelmakers in the Gulf and Israel, injecting fresh volatility into regional metal markets.
Barclays' analysts caution that, despite the headline risk, the immediate global supply response may be limited. The two damaged plants account for less than 20% of Iran's total steel capacity. Crucially, Barclays notes that Iran's national utilisation rate was already below 50% before the strikes. That underutilisation means Iranian output could, in theory, be restored by reallocating production to other domestic facilities that were not affected by the attacks.
While the direct loss of output from Mobarakeh and Khuzestan is meaningful domestically, the report identifies the Gulf Cooperation Council - excluding Iran - as the more strategically vulnerable region. Roughly 65% of GCC steel capacity was already facing operational constraints because of its heavy dependence on the Strait of Hormuz for raw material imports. Barclays argues that this "Hormuz factor" had already constrained output, so that direct military strikes on GCC plants would add only a limited incremental impact to actual production.
As a result of persistent domestic risk and capacity pressures, the Middle East is expected to lean more heavily on international markets to close any supply shortfall. The GCC is already a major net importer of steel, and Barclays highlights that China supplies over 60% of those imports. The analysts anticipate that dependence on Chinese exporters could deepen as the region seeks finished steel from abroad.
The report suggests that the direct consequences for European markets should be limited. Nonetheless, the regional shift in trade flows is likely to underpin demand for key raw materials - specifically iron ore and hard coking coal. Barclays projects that Middle Eastern buyers turning to Asian suppliers could support global blast furnace utilisation and sustain a "war-risk" premium on iron ore and hard coking coal pricing through the second quarter of 2026.
Overall, Barclays frames the immediate supply-side shock as contained by pre-existing logistical bottlenecks and spare capacity, while flagging a notable reorientation of regional trade patterns and an associated lift in raw-material demand and pricing risk over the near term.
Key points
- Production at Mobarakeh and Khuzestan was disrupted, but these plants represent under 20% of Iran's steel capacity and national utilisation was below 50% before the strikes.
- Approximately 65% of GCC steel capacity (excluding Iran) faced operational headwinds due to reliance on the Strait of Hormuz, limiting the incremental impact of direct strikes on actual output.
- The GCC already imports the majority of its steel from overseas, with China supplying over 60% of those imports, which could deepen and elevate demand for iron ore and hard coking coal.
Risks and uncertainties
- Tehran's threats of retaliatory strikes against Gulf and Israeli steelmakers create a risk of further regional disruption to steel production and trade flows.
- Operational dependence on the Strait of Hormuz represents a pre-existing vulnerability for GCC steel capacity, posing continued supply-chain uncertainty.
- Shifts toward Asian suppliers by Middle Eastern buyers could sustain a war-risk premium on iron ore and hard coking coal pricing through Q2 2026, introducing price volatility for miners and steelmakers.