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The Iran war is exposing key vulnerabilities in the world's supply chain for critical minerals, which find uses in defence, advanced technologies and energy.
From the F-35s overhead to the munitions being fired across the Gulf, the weapons of this war run on critical minerals – the same cobalt, copper and gallium that power smartphones, AI chips and electric vehicles.
The effective closure of the Strait of Hormuz, which is roiling global energy markets, is now exposing the vulnerabilities in the critical minerals supply chain.
“It isn't necessarily that the Iran conflict is causing a new issue around critical mineral supply chains. It's just highlighting the importance of diversification,” said Ashley Zumwalt-Forbes, a former Energy Department official now at the Baker Institute.
China dominates the supply chain for the critical minerals that F-35s and advanced weapons systems depend on. The Pentagon has been on a stockpiling spree since Beijing imposed export restrictions on many of them last year.
The day before the US and Israel launched co-ordinated strikes against Israel, the Pentagon asked mining companies to help boost supplies of 13 critical minerals that are used in the production of semiconductors and weapons, Reuters reported. Of the 13 materials on which the US is reliant on imports for – arsenic, bismuth, gadolinium, germanium, graphite, hafnium, nickel, samarium, tungsten, vanadium, ytterbium, yttrium and zirconium – China is the dominant producer for all of them.
The US has also been expanding its critical minerals list, adding copper in November, as a recognition of its important role in electrification, from power grids to construction and electric vehicles.
The Pentagon's move comes on top of previous initiatives by President Donald Trump's administration's efforts to bolster supply chains, including a $12 billion public-private partnership with the Exim Bank through Project Vault, which aims to establish a national stockpile similar to the strategic oil reserve.
“The Trump administration has been very strong on critical minerals, specifically looking to get creative around financing structures, to bring mines into operation, to bring processing facilities into operation, and to bring a defence lens to this market,” Ms Zumwalt-Forbes said.
However, those efforts could take years to bear fruit.
“In the interim, we are in a very compromised position,” Ms Zumwalt-Forbes said.
Hormuz disruptions highlight risks
China's export restrictions on critical minerals last year were a wake-up call for Washington and other countries to bolster their own supply chains. Now, the halting of crude tankers through the Strait of Hormuz is underscoring the risks markets face when there are major disruptions.
This means that, for the UAE, investing capital into the critical minerals sector solves one side of the equation. The other side is how to move these minerals, such as lithium carbonate, a vital material needed to help power the energy transition for its use in batteries used in EVs and grid storage.
“What would happen in a similar situation for lithium carbonate, or for some sort of rare earth concentrate and those that still need to be shipped globally?” Ms Zumwalt-Forbes said.
That disruption is already impacting the flow of sulphur, which is essential for copper and nickel, as well as fertiliser. The Middle East accounted for about 24 per cent of global sulphur production last year and 50 per cent of seaborne sulphur trade, which must be exported through the Strait of Hormuz, according to the Oregon Group.
Randy Munoz, industry leader for mining and natural resources at Marsh McLennan, said these types of disruptions have the potential to create ripple effects on companies.
"If you think about a mining site, they'll take the stuff out of the ground, but that stuff needs to get processed," he said.
"And there's a lot of chemicals that go into it in order to separate, particularly when you're looking at different oxides that require the further processing using these type of reagents."
A prolonged closure of Hormuz could also lead to other knock-on effects throughout the supply chain. Said Bakr, a research associate at the Arab Gulf States Institute, said that even a modest increase in insurance or logistic costs could have a real impact on the critical minerals sector, where projects operate on tight margins.
“Depending on how long the continuing regional turmoil persists and the severity of its implications for maritime traffic through the Strait of Hormuz, this could potentially increase price volatility across the supply chain,” he said.
Mr Munoz said there is a blind spot within supply chains that most companies do not see, making it more important than ever to understand alternative solutions.
"Part of our job as risk advisors is to find solutions and help our clients stay resilient, and it's looking at the vulnerabilies on company supply chains."
Minerals critical to Gulf's diversification ambitions
Among the recent agreements the US struck was with the UAE, which views critical materials as a cornerstone of its long-term economic security.
Driven by their diversification strategies, Gulf nations have been embarking on their own global efforts to secure international mining assets, establishing their own domestic capabilities, and reducing dependency on China while seeking to become reliable partners with the US.
“For Saudi Arabia and the UAE, the question is, how much will investing in critical minerals and the capacity to process investment … be affected by the war, and what other priorities will shift?” said Rachel Ziemba, founder of geopolitical risk firm Ziemba Insights.
“And that's a hard one to predict.”
Among the critical minerals crucial to the UAE's diversification agenda are copper, key to powering data centres and integrating artificial intelligence in the country's digital ecosystem.
The UAE has made an effort to strengthen its own efforts in the supply chain, with one of its biggest partners being the Democratic Republic of Congo, key place for metals like cobalt and copper.
Abu Dhabi's International Holding Company has been on its own deal-making spree. In 2023, it acquired a Zambia copper mine in 2023, and entered into a joint venture agreement with Angola in 2024, as well as separate agreements with Tanzania and Kenya to mine nickel and other metals. IHC chief executive Syed Basar Shueb told the Financial Times that their only competitor is mostly China.
In addition to the UAE, the US has also made deals with Saudi Arabia and Oman, which also have agreements with China.
“China's continued weaponisation of critical mineral supply chains and choice of who to sell materials to reinforces to the UAE and others how important these supplies are, and it's one of the reasons why I think it will continue to be an important priority, even in the context of the war,” Ms Ziemba said.
