Yes, iteration in this sense is basically traversing along a plane mostly in the direction of biggest gain. So you'll mostly traverse to local maximum, once you get to a local maximum, there is no evolutionary advantage to doing a step in any direction as they all lead to reduced performance which can cause you to miss a bigger maximum just around the corner.

That is why all iterative algorithms suffer from local maximum problems.

Don't they use large populations of possible solutions for this very problem?