Copper fell 0.5% to $13,275 a tonne on the London Metal Exchange on Monday after US forces seized an Iranian-flagged vessel, reigniting Gulf tensions and choking transits through the Strait of Hormuz. Futures also slipped below $6.10 a pound as Tehran signalled it wouldn't reopen Hormuz and postponed a planned second round of talks. The escalation has clouded a two-week ceasefire, lifted oil and put pressure on industrial metals. Traders are watching whether negotiators can seal a deal before the truce expires, because the outcome will influence shipping flows and near-term metal demand.
Copper prices retreated at the start of the week as renewed hostilities between the United States and Iran raised fears of a wider disruption to shipping and energy supplies.
The benchmark red metal closed at $13,275 a metric tonne on the London Metal Exchange, down 0.5% from the previous session. On another pricing measure, futures traded below $6.10 a pound. Oil moved higher on the same day, reversing some of last week’s falls.
What happened in the Gulf
The move followed an incident in the Gulf of Oman in which US forces seized an Iranian-flagged cargo vessel. Tehran then said it wouldn't reopen the Strait of Hormuz and signalled it would skip a planned second round of negotiations. President Donald Trump said he was unlikely to extend the two-week ceasefire he announced on April 7 and that the truce would end on "Wednesday evening Washington time" unless a deal was reached.
Transits through the Strait of Hormuz have fallen sharply as Tehran tightens control in response to strikes. Traders said a prolonged closure of the waterway would magnify the energy shock already rippling through global markets and push up inflationary pressure.
Market effects and demand drivers
Industrial metals moved lower alongside copper on the day. Aluminum also eased, though its market has been affected differently because smelter closures and production cuts in the Middle East have pushed prices up elsewhere.
Still, some fundamentals offered support to copper. Inventories tracked by the Shanghai Futures Exchange have dropped by almost 200,000 tonnes since the peak on March 13. That decline came during China’s peak consumption season, and traders in Shanghai say demand there has remained firm.
"We are currently in peak consumption season in China, and demand has maintained a high growth rate," said Jia Zheng, trading manager at Suzhou Chuangyuan Harmony-Win Capital Management Co. Jia added that Chinese prices had begun to move away from the direct impact of the Middle East situation.
Beyond near-term moves, market participants note that copper demand is underpinned by structural trends. Electrification of transport, expanding power grids and construction work all keep long-term demand steady. On the supply side, mining disruptions and underinvestment have kept output constrained, while new projects take years to bring online.
But the current episode shows how geopolitics can swamp those structural forces. A shock to oil supply from reduced tanker traffic or a closed Hormuz would push energy prices higher.
That can force central banks to tighten policy. Tighter policy would slow manufacturing and dent demand for industrial metals, traders say.
For now, prices are balancing those opposing forces. Short-term risk from the Gulf has lifted energy prices. At the same time, lower Chinese stockpiles and steady longer-term demand give copper some floor.
Market participants also flagged liquidity and positioning as amplifiers. Copper had rallied for four weeks before the pullback. That left futures markets vulnerable to swift reversals when a geopolitical shock arrived.
Analysts and traders are watching several near-term gauges. The status of the ceasefire and the outcome of any negotiation before the stated deadline are one.
Shipping flows through Hormuz are another.
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President Donald Trump said the two-week truce expires on "Wednesday evening Washington time", setting a clear deadline for negotiators.
This article was created with AI assistance.
