Copper prices on the London Metal Exchange extended losses on Thursday, touching a low of $13,378 per tonne during the session, marking the weakest level since May 20. Market concerns are centered on the escalating U.S.-Iran conflict potentially fueling inflation, slowing global economic growth, and thereby dampening demand for industrial metals.
The U.S. Central Command launched a new round of defensive strikes against Iran this week in response to the earlier downing of a U.S. military helicopter. These actions indicate that the prospects for a peace agreement between the U.S. and Iran in the near term are slim. Iran announced the closure of the Strait of Hormuz, warning that any oil tankers or merchant vessels attempting to pass through the waterway would face military action. This strait is the world's most critical energy transit corridor, handling approximately one-fifth of global crude oil shipments.
Energy prices surged in response, with Brent crude oil briefly surpassing $95 per barrel. There is widespread market concern that persistently high energy prices will squeeze manufacturing and other core copper-consuming sectors while simultaneously intensifying inflationary pressures. The U.S. Consumer Price Index for May rose 4.2% year-on-year, hitting a three-year high. Some analysts note that market expectations for the Federal Reserve to raise interest rates due to the escalating conflict are weighing on base metal prices.
As of the European trading session on Thursday, LME three-month copper was down approximately 0.6% to $13,436 per tonne. The most actively traded copper contract on the Shanghai Futures Exchange fell 1.5% to 102,910 yuan per tonne. Among other metals, zinc prices declined 1.2%, while aluminum prices edged up 0.5% after plunging 2.3% on Wednesday.
However, analysts also point to supportive factors for copper prices. The U.S.-Iran conflict is directly impacting global copper supply—disruptions to shipping through the Strait of Hormuz have interrupted roughly a quarter of the world's sulfur supply, a key raw material for manufacturing sulfuric acid. A shortage of sulfuric acid is now posing a serious threat to hydrometallurgical copper production in regions like the Democratic Republic of Congo and Chile, a process that accounts for about 16% of global refined copper output.
A previous forecast from Citibank suggested that if the Strait of Hormuz can reopen before summer, coupled with tight physical market fundamentals, copper prices could reach $15,000 per tonne within the next 12 months. However, the bank also warned that continued instability in the Middle East remains a key downside risk for copper prices.
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