Copper falls as Middle East fighting renews inflation risks

SINGAPORE: Copper prices fell on Monday, as fighting escalated between the U.S. and Iran, with Tehran saying it had closed the vital energy corridor of the Strait of Hormuz once again.

Benchmark three-month copper on the London Metal Exchange slipped 0.72% at $13,387 a metric ton by 0300 GMT. The most-traded copper contract on the Shanghai Futures Exchange lost 0.75% at 103,030 yuan a ton.

U.S. and Iranian forces exchanged heavy missile and drone assaults over the weekend, dampening risk appetite and rekindling fears that higher energy prices and inflation levels could prompt policymakers to keep interest rates higher for longer.

Oil prices increased, while the non-yielding gold and silver fell.

Higher interest rates weigh on economic activity and thereby pressure industrial metals.

The U.S. dollar strengthened slightly over the weekend, making greenback-denominated commodities like copper more expensive for buyers using other currencies.

Meanwhile, aluminium largely shrugged off a potential disruption to supply that looked set to return to capacity following an interim peace deal after war first broke out in the key Middle East region on February 28.

The metal was largely stable on the LME, ticking up 0.05%, and fell slightly on the SHFE, by 0.35%. On Friday, major supplier Emirates Global Aluminium said it had restarted its alumina refinery in the UAE.

At the same time, visible aluminium stocks in LME-registered warehouses were at their lowest levels since 2022. The share of available Russian-origin aluminium stocks in LME warehouses increased to 95% in June, exchange data showed on Friday.

Despite the conflict and waning inventories, consumers have sought alternative sources of material, offsetting the worst of the supply shortage.

Among other LME metals, zinc lost 0.71%, lead slumped 1.08%, nickel sank 1.02% and tin slipped 0.24%.

On SHFE, zinc lost 0.64%, lead slipped 0.78%, nickel ticked 0.05% higher and tin sank 1.38%.