U.S.-Iran Conflict Escalation Fuels Inflation Expectations as Copper Prices Drop to Three-Week Low
Taylor Wilson
LME copper fell to $13,378 per tonne, a three-week low, after two consecutive US strikes on Iran dashed peace-deal hopes; rising oil prices and accelerating inflation now have markets pricing in a potential Fed rate hike.
Why did copper drop?
LME copper hit $13,378 per tonne on Thursday — the lowest since May 20.
As of 11:40 a.m. Shanghai time, the contract traded at $13,431, down 0.6%.
This means → the sell-off is not a one-day event; three weeks of mounting headwinds have steadily pushed prices lower.
How does a US-Iran conflict move copper?
US Central Command announced a fresh "self-defence strike" on Iran, one day after a retaliatory strike following the downing of a US helicopter — two rounds in two days.
Escalation → higher oil → stronger inflation expectations. US May CPI already posted its fastest rise in over three years; Middle East tensions add fuel.
In plain terms = war lifts oil, oil lifts prices, rising prices raise the odds that the Fed hikes rates — and rate hikes are bearish for commodities like copper.
What are analysts watching next?
Everbright Futures analyst Zhan Dapeng noted that expectations of a conflict-driven Fed rate hike are suppressing base-metal prices.
Heightened copper volatility is also making Chinese buyers cautious ahead of the seasonal summer lull — sidelining demand further.
This reflects a copper market whose core pressure is not supply, but a twin squeeze of rate-hike expectations and buyer hesitation.
How are other metals doing — and what is the key signal?
Zinc fell 1%; aluminium edged up 0.5% after slumping 2.3% on Wednesday — base metals broadly weak.
Two verification points will set the next direction: ① whether the Fed actually moves toward a hike; ② whether Middle East tensions show any real de-escalation.
This means → a clear signal on either variable will re-price demand expectations across base metals — until then, markets are likely to stay in wait-and-see mode.
Content is for reference only, not financial advice.