NextFin News - Copper prices held firm near historic highs on Tuesday as U.S. President Trump formally rejected Iran’s latest peace proposal, extinguishing hopes for a swift de-escalation of the ten-week-old conflict in the Middle East. Benchmark three-month copper on the London Metal Exchange traded at $13,326 per metric ton, remaining within striking distance of the record levels reached in late April. The rejection of the Iranian plan, which U.S. President Trump characterized as "unacceptable," has reignited fears of prolonged disruptions to global shipping through the Strait of Hormuz, a critical artery for both energy and industrial commodities.
The geopolitical tension is acting as a powerful floor for a market already strained by structural deficits. While the prospect of peace negotiations briefly pulled prices lower in mid-April, the return to a wartime footing has forced traders to re-evaluate the risk premium embedded in industrial metals. Beyond the immediate threat to logistics, the conflict has complicated the global supply chain for refined copper, particularly as energy costs remain elevated. Brent crude oil is currently priced at $105.14 per barrel, maintaining pressure on the smelting and refining operations that are essential to meeting global demand.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that the market is currently caught between the "fear of supply-side shocks and the reality of an AI-driven demand boom." Hansen, who has maintained a broadly constructive view on industrial metals over the last two years, argues that the geopolitical premium is now being layered on top of a fundamental scarcity that was already visible before the conflict began. However, his view is not universally shared as the definitive driver of current pricing. Some analysts at ANZ suggest that while the risk remains skewed to the upside, the current price levels may already reflect the worst-case scenarios for Middle Eastern logistics, leaving the market vulnerable to a sharp correction if diplomatic backchannels remain active.
The divergence in market sentiment is becoming more pronounced as the conflict drags on. On one side, the "bull" case rests on the unprecedented demand from the artificial intelligence infrastructure buildout and the global energy transition, which many believe will keep the market in a deficit regardless of the geopolitical outcome. On the other, more cautious observers point to the fact that LME copper inventories have not yet reached the "critical" lows that typically precede a sustained breakout above $14,000. This suggests that the current rally is driven as much by speculative positioning and geopolitical hedging as it is by physical tightness.
U.S. President Trump’s administration has signaled that it will maintain its naval blockade and sanctions regime until Iran agrees to more stringent terms, including a total cessation of support for regional proxies. This hardline stance suggests that the "peace dividend" traders were hoping for last week was premature. For the copper market, this means the focus shifts back to the resilience of the global supply chain. If the Strait of Hormuz remains a flashpoint, the cost of insuring and transporting cathode will continue to rise, potentially pushing the LME benchmark toward the $14,000 threshold before the end of the quarter.
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