Iron is first attested in Anatolia in the third millennium BCE. An iron dagger with trace amounts of nickel was found in the "royal" tombs of Alaça Höyük (ca. 2300 BCE). Iron is better known, however, from Old Assyrian texts (2000-1750 BCE). During this time period, Assyrian merchants regularly traveled to Anatolia to trade textiles and other Mesopotamian products in exchange for precious metals. Iron was about forty times as valuable as silver in the Old Assyrian period.
In the Old Hittite period (1600-1450 BCE), iron was used especially for spears and sceptres during religious ceremonies, which served as symbols of the king's power. By the Middle Hittite period (ca. 1450-1350 BCE), the Hittites were also using iron for ceremonial axes, the king's lituus (a curved staff), and jewelry. An excerpt from the KI.LAM festival:
Then the palace spear-man takes the iron spear from the king and gives it to the palace official.
The first of the palace officials takes an iron axe from the last of the palace spear-men and gives it to the supervisor of the palace officials. The supervisor of the palace officials gives it to the king. The place on the axe where the engraving of the Storm God is, he turns that side toward the king...
Attestations of iron in Hittite texts really take off in the Hittite empire period (1350-1180 BCE), however. By this time iron was also used for cult idols, knives, daggers, and swords. Its use for jewelry declined, suggesting the metal was not quite as rare and impressive as it had been. That it was now measured by the mina like copper rather than by the shekel like gold and silver (as it had been previously) supports this conclusion.
The Hittites sometimes referred to "black iron" (AN.BAR GE6), which is possibly meteoric iron. A ritual for the construction of a palace refers specifically to the use of meteoric iron.
They have laid foundations of silver and gold. The gold they brought from Birunduma. The silver they brought from Kazza. The lapis they brought from Mount Takniyara. The marble they brought from Kanisha. The jasper they brought from the land of Elam. The diorite they brought from the earth. The black iron of heaven they brought from heaven. Copper and bronze they brought from Mount Taggata in Alašiya.
Iron was worked by smiths (LÚ.SIMUG). The first step was to sort the raw material and purify it. The metal was then cast (lahuwai, "to pour") into ingots. Three types of iron are known - iron (AN.BAR), iron "from the furnace" (AN.BAR ŠA KI.NE), and "excellent" iron (AN.BAR SIG5).
Iron does not seem to have been a significant metal for commerce and taxes. Andreas Müller-Karpe calculated the frequencies of metals in Hittite economic texts ("Anatolische Bronzeschwerter und Sudosteurop" in Festschrift fur Otto-Hermann Frey zum 65. Geburtstag, pp. 74-78). He found that 25% of taxes were paid in metal; of these taxes, 60%, 13%, and 8% were paid in copper, silver, and tin, respectively. Gold and iron had only one attestation apiece.
Further reading
Muhly, J.D. 1980. The Coming of the Iron Age.
Waldbaum, Jane. 1978. From Bronze to Iron. The Transition from the Bronze Age to the Iron Age in the Eastern Mediterranean.
Yalçın, Ünsal. 1999. "Early Iron Metallurgy in Anatolia." Anatolian Studies 49: 177-87.