Iran War, Indonesia Caps to Support Nickel Prices in 2026

The expansion of the Iran conflict and restrictive Indonesian mining quotas are driving heightened volatility across global nickel, silver, and gold markets, directly impacting Mexico’s mining sector and export revenues. While supply deficits in silver persist, a modest nickel surplus and shifting battery technologies are tempering price gains, forcing Mexican producers to navigate rising input costs and supply chain disruptions for critical materials like sulphur. These geopolitical and supply-side dynamics require stakeholders in Mexico’s extractive industries to balance operational pressures with fluctuating global demand for clean energy and industrial metals.

The war in Iran and output restrictions in Indonesia are expected to support nickel prices in 2026, though a persistent global oversupply will continue to limit gains, according to industry research firm BMI. Citing "a structurally firmer price environment," BMI on April 14 raised its 2026 nickel price forecast to US$16,/t, up from a prior estimate of US$15,800/t.

Three-month nickel futures on the London Metal Exchange rose 0.2% to US$18,250/t in April 15 trading, following a 2.9% surge on April 14.

Indonesia plays a central role in shaping nickel prices. The country continues to expand production capacity, with refined nickel output forecast to grow 9.8% in 2026 following 9% growth in 2025, which BMI expects will widen the global market surplus "modestly" to approximately 324,000t, limiting the scope for sustained price rallies.

Still, policy adjustments offer some support. Indonesia's decision to cap nickel ore mining quotas for 2026 at 260M to 270M wet metric tonnes has improved market sentiment, BMI said. That compares to a quota of 379Mt a year ago.

"For the remainder of 2026, while geopolitical developments in the Middle East are expected to continue influencing market sentiment, the nickel price outlook is likely to remain dominated by supply-side dynamics in Indonesia," BMI wrote.

"Over the medium to long term, Indonesia remains the largest source of uncertainty for the refined nickel market," BMI added. "Ultimately, the speed at which refined nickel capacity is scaled up will determine how well supplied the global market will be over the coming decade."

Iran War Squeezes Sulphur Supply

Geopolitical risks tied to the Iran conflict are playing a growing role. With more than two-thirds of Indonesia's sulphur imports originating from the Middle East, supply disruptions could tighten sulphur availability, raising input costs for high-pressure acid leach (HPAL) operations and constraining nickel supply growth.

A sulphur shortage caused by the Iran war has already forced several Indonesian nickel processors to curb output by at least 10% since last month, Reuters reported this week, citing three sources familiar with the matter. Higher energy costs linked to the conflict add further pressure, particularly for higher-cost operations outside Indonesia, BMI noted.

Demand Growth Slowing

Global nickel demand is expected to grow approximately 3% in 2026, down from 5.8% in 2025, reflecting softer expansion across key end-use sectors. Demand fundamentals remain anchored by stainless steel production and the clean energy transition, particularly electric vehicles and renewable energy systems. Mainland China is expected to remain the largest source of demand growth, though at a slower pace than in recent years.

Structural shifts in battery technology present an additional headwind. The increasing adoption of lithium iron phosphate batteries is eroding demand for nickel-intensive chemistries. "This mix shift is likely to keep sentiment subdued and temper nickel demand growth despite broader macro tailwinds," BMI said.

BMI forecasts a gradual narrowing of the surplus as demand climbs on the back of stainless steel growth and clean energy acceleration. Nickel prices could average US$16,700 in 2027, rising to US$19,000 by 2030 and reaching US$22,000 by 2032 as the market tips into deficit, the firm projected.

Precious Metals Context

The Iran war is exerting parallel pressure across commodity markets. Gold climbed as much as 1% to nearly US$4,839/oz on April 16 as optimism over diplomatic progress eased inflation concerns, with spot gold up 0.4% to US$4,808/oz as of midday in London. Bullion-backed ETFs have added approximately 25t so far this month, reversing outflows of 94t in March, according to a Bloomberg tally. Gold has fallen about 8% since the war began Feb. 28.

"Given the fragile ceasefire and switch to focus on real yields, gold is not yet out of the woods," Suki Cooper, Global Head of Commodities Research, Standard Chartered Plc, wrote in a note. With competing risks of inflation and slower growth, "the policy response will be key," she said.

Silver rose 0.7% toUS$79.5/oz on April 15, though the metal remains down 35% from its January 29 record high of US$121.6/oz. The silver market is heading for a sixth consecutive year of structural deficit, with the supply gap expected to widen to 46.3Moz in 2026 from 40.3Moz in 2025, according to the World Silver Survey 2026, published by the Silver Institute and produced by Metals Focus. A sulphur shortage, a liquidity squeeze risk in London vaults, and Iran war-related demand headwinds are among the factors shaping the metal's near-term trajectory.

"Lease rates in London have largely normalized, but risks of another liquidity squeeze this year remain," said Philip Newman, Managing Director, Metals Focus.

Across base and precious metals alike, the resolution,  or escalation,  of the Iran conflict remains a critical variable for commodity markets through the remainder of 2026.