Copper falls as Middle East fighting renews inflation risks

Copper prices fell on Monday as fighting escalated between the U.S. and Iran, with Tehran saying it had once again closed the vital energy corridor of the Strait of Hormuz. Benchmark three-month copper on the London Metal Exchange slipped 0.64% at $13,398.5 a metric ton by 0701 GMT. The most-traded copper contract on the Shanghai Futures Exchange lost 0.68% to 103,100 yuan ($15,199.54) 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. Higher interest rates weigh on economic activity, thereby pressuring industrial metals. Oil prices increased, while the non-yielding gold and silver fell. The U.S. dollar strengthened slightly over the weekend, making greenback-denominated commodities like copper more expensive for buyers using other currencies. 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 light metal fell on the LME by 0.33% and declined on the SHFE by 0.65%. Aluminium prices have been pressured by announcements of a string of production restarts. Most recently, 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, with the vast majority of available stocks - 95% - being of Russian origin in June, exchange data on Friday showed. Among other LME metals, zinc lost 0.88%, lead lost 0.98%, nickel lost 1.29% and tin dipped 0.23%. Elsewhere on SHFE, zinc lost 0.84%, lead lost 0.66%, nickel dipped 0.23% and tin dropped 1.7%.