LME Base Metals H1 2026: War and Peace Talks Alternately Drive Price Action
Taylor Wilson
The Iran war sent LME's six base metals through a full cycle of euphoria, slump, and resilience in H1 2026 — aluminium took the hardest supply hit but its war premium has faded, tin and zinc led gains, and copper sat locked in a range of contradictory signals. The second half hinges on three variables: Hormuz, Doha, and U.S. copper tariffs.
Aluminium: the hardest hit — so why has the war premium vanished?
Missile strikes destroyed two Gulf smelters; logistics disruptions at the rest cut regional annualised output by roughly 2 million tonnes between February and May.
This means → aluminium had the largest "physical exposure" of all six metals — capacity was literally bombed out, not indirectly squeezed.
The supply shock pushed three-month LME aluminium to $3,787.50/t (a four-year high, early June), but the war premium then unwound almost entirely as markets priced in normalisation.
In plain terms = panic drove the price up; "it's nearly over" expectations pulled it back down. Yet inventories are down to just over 400,000 tonnes — mostly Russian metal — so the floor still holds.
Copper: bulls and bears locked in a draw — why can't either side win?
On the macro side, the war threatened global growth — bearish. On the micro side, the Hormuz blockade caused a sulphuric acid shortage, squeezing copper producers that use leaching — a process that dissolves copper from ore with acid.
Copper concentrate treatment charges have fallen so far that smelters now depend on by-product revenue just to keep operating. This reflects a severe profit imbalance between upstream miners and midstream smelters.
U.S. copper tariffs remain undecided; the CME-LME arbitrage window stays open, pulling global metal into the U.S.
Result: three-month LME copper has traded sideways at $13,000–14,000/t since mid-May. Bulls still back the structural-deficit narrative, but the short-term signal is a stalemate.
Zinc: almost no war exposure — so why is it up 14%?
Zinc has virtually no direct Gulf exposure, yet it rallied 14% in H1. Three-month LME zinc hit $3,658/t in early June — a near-four-year high.
This means → the driver was not a geopolitical premium but a complete reversal in supply logic: the market expected a large surplus at the start of the year, but the International Lead and Zinc Study Group now projects a slight deficit.
The shortfall is concentrated outside China — ex-China smelter output keeps undershooting forecasts. China itself is steadily ramping up and may reach self-sufficiency soon.
In plain terms = the global zinc maths were wrong. Overseas output couldn't keep up, so the price re-rated.
Nickel: Indonesia tightens then loosens quotas — a rollercoaster?
Jakarta slashed mining quotas sharply. Combined with a Gulf sulphur shortage pressuring acid-leach producers — those using acid to process nickel ore — three-month LME nickel surged to $20,000/t in May (a two-year high).
Markets then heard Indonesia would ease the quotas; nickel tumbled back toward $16,000/t.
This reflects how heavily nickel pricing depends on a single policy lever — one sentence on Indonesian quotas can swing the price by $4,000.
Meanwhile, surplus metal keeps piling up: Shanghai Futures Exchange nickel inventories just topped 100,000 tonnes for the first time since 2016.
Tin and zinc led — how wide was the H1 divergence?
By end-June, tin and zinc topped the leaderboard (zinc +14%). Aluminium's war premium unwound, copper traded flat, and nickel gave back its gains.
This means → the same war transmitted through entirely different channels: aluminium via physical destruction, zinc via a supply-demand miscalculation, nickel via policy swings, and copper via a bull-bear deadlock.
The LMEX index closed mid-range — in plain terms = H1's panic left no permanent scar, but it didn't return to the starting line either.
What to watch in H2? How do the three key variables play out?
The Strait of Hormuz: whether it truly reopens determines aluminium's supply-recovery pace and copper's acid supply.
Doha peace talks: a ceasefire would drain remaining war premiums; a breakdown could re-inflate aluminium and nickel.
Trump's copper tariff in its final form: once it lands, the CME-LME arb window closes and global copper flows reshuffle.
This means → H2 metals remain "politically priced" — the battlefield, the negotiating table, and the White House will matter more than any supply-demand model.
Content is for reference only, not financial advice.