For most of this year, aluminium has been hostage to a war. As US-Iran tensions escalated, traders feared that supplies moving through the Strait of Hormuz would get choked, and prices on the London Metal Exchange (LME) surged nearly 25% between January and June, peaking at $3,752 per metric tonne (intraday).Then came the ceasefire, and the fear premium drained out. Prices have corrected by more than 17% to around $3,019, and aluminium stocks have fallen with them; National Aluminium Company (Nalco) has shed over 19% since the start of June, and Hindalco Industries over 15%.Just as this story went to press, tensions flared again. Following fresh Iranian attacks on ships in the Strait of Hormuz and retaliatory US strikes, President Trump declared the ceasefire over, sending oil prices sharply higher. A renewed conflict could pump the geopolitical premium back into aluminium prices in the near term.But here is what investors whipsawed by these swings need to grasp: the big moves this year have been about geopolitics, not consumption. Prices did not surge because the world was buying more aluminium, nor did they crash because demand collapsed. Beneath the war noise, analysts say the market is fundamentally healthy, with demand from power, renewables, and electric vehicles outpacing limited global supply growth. That is why analysts remain constructive on Indian producers such as Nalco, Hindalco Industries and Vedanta Aluminium Metal (a demerged entity of Vedanta). Prices may stay volatile as long as West Asia burns, but the demand-supply backdrop is expected to keep realisations healthy and earnings stable.Hitesh Jain, Lead Analyst at Yes Securities, expects aluminium prices to remain resilient despite upcoming supply additions from Indonesia and China, supported by robust demand from the power, renewable energy, and electric vehicle sectors. He expects prices to trade in the $2,800-3,000 per MT range over the medium term and remains optimistic about the longterm outlook, citing favourable structural demand-supply dynamics.Additionally, uncertainty surrounding the US Federal Reserve’s interest rate trajectory is influencing aluminium prices. As markets increasingly price in a lower probability of rate hikes this year, the metal could find support from improved investor sentiment. Reports released by JPMorgan, ING and Kotak Securities in June 2026 continue to project a deficit in the global aluminium market this year. Kotak Securities estimates aluminium demand to grow at a compound annual rate of 1.5% between 2026 and 2029, marginally ahead of the expected 1.3% growth in supply during the same period.Indonesia aims to expand its aluminium smelting capacity to 14.9 million tonnes by 2030. However, Aditya Welekar, Senior Research Analyst at Axis Direct, noted that such an expansion would require substantial power-generation capacity, which could become a key constraint. He estimates Indonesia’s aluminium capacity may reach only 3.4-3.5 million tonnes by 2030 because of these energy-related limitations.Meanwhile, China’s aluminium industry is nearing its effective production cap of 45 million tonnes, restricting its ability to meaningfully increase output. This structural limitation is expected to curb incremental global supply and support a tighter market balance over the medium term.