More than two months into the Iran War, the effects are increasingly rippling through the global battery supply chain. Although Iran is not a major supplier of lithium, cobalt or nickel, it sits beside the Strait of Hormuz, one of the world’s critical shipping corridors, which has been largely disrupted during the conflict. 

The impact on energy markets and global shipping has driven up energy and logistics costs, turning the war into a financial stress test for the lithium-ion battery supply chain—from mining and refining to the manufacturing of finished batteries.

Unlike the Russia–Ukraine war, which had a direct impact on battery supply chain materials such as nickel and lithium, the current conflict is affecting less visible but still critical materials that could have potentially damaging consequences.

Short‑term impact on the EV battery supply chain: Rising costs and material processing challenges

The disruption of shipping lanes is arguably the most visible channel through which the Iran war is affecting global economies. The closure of the Strait of Hormuz, which handles nearly 20–30% of global oil flows, has been a major disruption that has halted tanker traffic, forcing expensive rerouting through pipelines or distant sea lanes and slashing supply by millions of barrels per day. 

Consequently, oil prices have spiked to $90–$140 per barrel, driving up transport and refining costs, fueling global inflation and sharply raising energy prices—severely impacting import-reliant economies in Asia, Europe, and beyond. 

This disruption has translated into higher EV battery manufacturing costs. A quick analysis of cell manufacturing operations in Germany by S&P Global Mobility indicates that gas-fired energy generation costs have risen by nearly 50%. For a prismatic NCM811/Gr cell, for example, production is estimated to be around $103.4/kWh, of which $5.2/kWh is the energy component—approximately 5% of total cell cost. 

As the Iran war persists, the increase in costs will become more pronounced.

The higher energy costs are impacting battery manufacturing in a number of ways. First, at a time when battery manufacturers are already facing margin pressure due to the electric vehicle (EV) slowdown and a corresponding push toward energy storage systems, they will need to find ways to reduce manufacturing costs.

One potential response could be a temporary pivot away from synthetic graphite toward natural graphite. Synthetic graphite production depends heavily on high-energy inputs, and sustained increases in energy prices could significantly elevate production costs. In addition, the availability of synthetic graphite could become more constrained due to the Strait of Hormuz disruption.

Second, RKEF (Rotary Kiln-Electric Furnace) conversion—a dominant pyrometallurgical process used to convert saprolite laterite nickel ore into high-grade ferronickel or nickel matte—is also highly sensitive to energy prices, and manufacturers could pivot away from it faster than expected. As shown in the chart below, around 33% of the light-vehicle high-voltage batteries used nickel matte in cells last year.

share of nickel in light vehicle segment

Third, while some manufacturers have signaled their intent to transition to hydrometallurgical HPAL processing—producing mixed hydroxide precipitate or mixed sulfide precipitate—the switch will not be easy. HPAL processing is heavily dependent on sulfuric acid for ore digestion and hydrometallurgical treatment. But because sulfur and other chemical feedstocks are byproducts of oil and gas refining, disruptions in the Strait of Hormuz have tightened availability and raised prices.  

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Iran war and other geopolitical pressures strain supplies of multiple EV battery components

The Iran war is also disrupting the markets for sulfuric acid, naphtha and aluminum. 

Sulfuric acid. In 2025, nearly 67% of nickel used in light-vehicle batteries was MHP or MSP, both of which require sulfuric acid during processing. This share is expected to climb slightly to 69% in 2026, but that trajectory is dependent on the duration and severity of the conflict.

Mainland China has reportedly banned exports of sulfuric acid to tighten its control over this key industrial chemical. China’s sulfuric acid export ban impact is felt keenly in Indonesia, whose rapidly expanding nickel-processing industry is particularly vulnerable. 

Naphtha. The war’s impact extends to other petrochemical‑derived inputs, including solvents and monomers used in electrolyte and binder production. It underscores that geopolitical disruptions affect not only primary cathode and anode materials, but also a range of less visible but essential EV battery supply chain components.

The separator, electrolyte solvent and binder—critical supporting components of lithium-ion batteries—all depend on naphtha, a refined petroleum product heavily dependent on Middle Eastern battery supply chains. With Asia sourcing more than 60% of its naphtha from the Gulf—and the Strait of Hormuz effectively closed to commercial traffic—these materials face battery supply chain disruptions that will appear first as price spikes before escalating into factory shortages.

Aluminum. Aluminum is another key battery material input exposed to price volatility and battery supply chain pressure. The price has already crossed $3,700 per metric ton, up from less than $3,000 in mid-February. The impact of higher aluminum costs is not uniform across chemistries. Lithium‑iron‑phosphate (LFP) refining tends to be less reagent‑intensive than high‑nickel‑cobalt‑aluminum or NMC811 systems, so the relative cost shock is smaller for LFP‑focused production lines.

Aluminum is also extensively used in battery pack enclosure trays and covers. According to S&P Global Mobility forecasts, nearly 69% of pack trays in plug-in electric vehicles use aluminum, and 17% of enclosure covers do. 

Long-term impact: Localization of the EV battery supply chain and increased BEV demand

For the lithium‑ion battery sector, the cumulative effect of the Iran War clearly signals that geographic dispersion and battery supply chain regionalization are no longer optional risk‑mitigation tactics—but core strategies for competitiveness.

Accordingly, investment is already shifting toward localized refining and precursor‑material capacity. Europe and North America are accelerating investments in lithium‑conversion plants, graphite‑coating lines and electrolyte‑salt‑manufacturing assets to reduce dependence on long‑haul, Gulf‑exposed logistics.

These efforts are increasingly framed as resilience‑building measures that reduce exposure to chokepoints like the Strait of Hormuz. Even within Asia, some countries are reassessing reliance on a single maritime corridor and exploring secondary routes and stockpiling arrangements.

While the battery industry faces near-term cost pressure, rising fuel prices from the Iran war could ultimately accelerate consumer demand for BEVs. In the past few years, EV demand has been slowing in several key markets, driven largely by the withdrawal of government incentives for electric vehicles. Consumer preference has gradually shifted toward hybrids, reflected in automaker announcements expanding their hybrid lineups.

In this environment, BEVs may see a temporary surge of interest as a potential hedge against oil supply disruptions. However, this enthusiasm might be short-lived, rather than triggering a sustained, transformative shift toward EVs.

The future of the battery supply chain

The Iran war is not a crippling event for the lithium‑ion battery supply chain, but it is a powerful stress test of the globalized, logistics‑heavy model that underpins the current EV transition. While the direct impact on battery demand may be modest, the indirect effects on costs and lead times are real—and likely to persist.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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