Brent crude crossed US$108 a barrel on Monday, capping the largest weekly surge in futures trading history, after the Iran war - now in its ninth day - disrupted roughly 20% of global oil supply, closed the Strait of Hormuz to commercial shipping and sent stagflation fears rippling through every asset class on the planet.
On 28 February - the day before Operation Epic Fury began - the Pentagon asked more than 1,500 companies in the Defence Industrial Base Consortium to submit proposals for projects that could mine, process or recycle 13 critical minerals, with funding of US$100 million to over $500 million per project.
The list includes arsenic, bismuth, gadolinium, germanium, graphite, hafnium, nickel, samarium, tungsten, vanadium, ytterbium, yttrium and zirconium - materials used in semiconductors, weapons systems and jet engines.
The U.S. is reliant on imports for most of them, and China is the dominant producer of all of them.
The conflict is now feeding cost inflation into every layer of the Western critical minerals development pipeline, from operating expenditure through to shipping, project capital and the cost of financing.
Diesel on the balance sheet
Diesel typically accounts for 20% to 40% of an open-pit mine's total opex, with a single ultra-class haul truck burning 300-500 litres per hour.
A fleet of 25 trucks running around the clock can consume hundreds of thousands of litres per week, making fuel one of the largest variable cost items on the balance sheet.
At $70 Brent, that is already a significant line item. But at $110? - it materially alters the economics of practically every single feasibility study completed in the past two years.
S&P Global's mine cost outlook for 2026, published in January, noted that persistent inflation, rising energy costs and declining ore grades were establishing a new, elevated cost standard across all metals - an assessment made before crude doubled.
Diesel price movements also cascade through mining supply chains into explosives (ammonium nitrate production is energy-intensive), steel for grinding media and structural work, rubber for tyres and the reagents used in mineral processing.
Shipping through the war zone
The Strait of Hormuz closure adds a second cost layer.
Tanker traffic through the waterway dropped by roughly 70% within days of the strikes before falling to near zero, and container shipping giants Maersk, CMA CGM and Hapag-Lloyd suspended all transits, rerouting via the Cape of Good Hope.
The diversions add approximately 3,500 nautical miles and roughly $1 million in additional fuel costs per voyage, with emergency freight surcharges of US$2,000 to US$3,000 per TEU now standard across the major lines.
The disruption extends beyond oil. The Gulf is also a transit hub for aluminium from the UAE, fertilisers from Qatar and Saudi Arabia, and manufactured goods moving through Jebel Ali.
Critical minerals supply chains in Asia that depend on energy imports flowing through Hormuz are exposed, and Japan's refiners - who source ~95% of their crude from Gulf producers - have already asked the government to release emergency stockpiles.
Capital crunch
Before the war, traders had been pricing in rate cuts from the Federal Reserve by mid-2026 - however, now that expectation has largely unwound.
Nomura economists noted the Iran conflict solidifies the case for central banks to hold rates steady, as policymakers weigh inflationary pressure from energy against a U.S. economy that lost 92,000 jobs in February and oil above $100 a barrel.
For critical minerals developers, the timing is significant.
The International Energy Agency estimates that US$500 billion to US$600 billion in new mining capital investment is required between now and 2040 just to meet demand under current policy settings, but investment momentum was already weakening before the conflict began.
IEA's 2025 outlook found that critical minerals spending grew just 5% in 2024 - down from 14% the year before - and adjusted for cost inflation, real growth was 2%.
Junior miners and project developers are the most exposed.
S&P Global data shows the average mine now takes 17.9 years from discovery to production, nearly three times the timeline of the 1990s, and in the United States, the figure stretches to 29 years.
These projects require patient, low-cost capital over extraordinarily long horizons, which a higher-for-longer rate environment does not provide.
Offsetting signals
The same conflict is also accelerating government spending on supply chain security.
The IEA notes that the energy sector accounted for 85% of total demand growth for battery metals over the past two years, and an oil-driven inflation shock that slows EV and renewable deployment would undermine the revenue assumptions underpinning new critical minerals projects.
At the same time, White & Case's 2026 mining and metals survey found that 47% of respondents now rank political variables - mitigating geopolitical risk, securing policy support, or access to critical minerals - as their main priority for the year ahead.
The Trump administration has taken equity stakes in MP Materials, Lithium Americas and Trilogy Metals, a $12 billion minerals stockpile backed by the U.S. Export-Import Bank is operational, and the Pentagon's DIBC request offers up to $500 million per project for domestic supply of defence minerals.
Whether government capital deployed at that scale can offset the combined drag of triple-digit oil, elevated rates and compressed margins across the development pipeline is the central question facing the sector.
On the horizon
- Duration of Hormuz disruption: Qatar's energy minister warned crude could reach $150 a barrel if tankers remain blocked.
Every week the Strait stays closed compounds the cost inflation hitting mining operations globally.
- Central bank signals: The RBA, Fed and ECB are all navigating a simultaneous inflation and growth problem.
Any shift toward rate hikes - or further delays to cuts - tightens financing conditions for capital-intensive mining projects.
- Pentagon DIBC deadline (March 20): The first tranche of proposals for the 13 defence minerals will indicate how quickly domestic supply can realistically scale, with company-specific catalysts likely across tungsten, rare earths and nickel.
- Copper tariff decision (by June 30): The U.S. Commerce Secretary is expected to recommend whether to impose a 15% universal duty on refined copper imports from 2027, which at current prices and supply constraints could reshape global trade flows.
- China's response: Beijing dominates refining for 19 of 20 critical minerals analysed by the IEA, and any tightening of export controls in response to the broader geopolitical environment would compound the supply constraints the West is already contending with.
