The copper market, widely regarded as a barometer of global economic activity, remains alert to the evolving situation in the Middle East, which has introduced significant uncertainty into financial markets.
In the short term, the primary effect of rising military tensions would likely manifest as upward pressure on copper prices, explained Juan Cristóbal Ciudad, Senior Analyst at Plusmining. In fact, on Monday, the commodity closed with an increase of nearly 1% on the London Metal Exchange, reaching US$4.55 per pound.
These scenarios, currently unlikely but potentially devastating, involves the disruption of key global trade routes, such as the Strait of Hormuz, which “could affect both the copper supply and the availability of essential inputs for its production and transport—particularly oil—potentially triggering widespread price hikes,” he elaborated.
Such a situation, according to Juan Ignacio Guzmán, CEO of GEM Consulting, could lead in the very short term to “manufacturing companies that rely on copper increasing their purchases to stock up and secure inventory.”
Additional upward momentum in demand for the commodity may also stem directly from the military sector itself, Ciudad added, given copper’s critical role in combat vehicles, electronic systems, and key components of defense infrastructure.
“Copper could gain even more strategic importance, opening up new sales opportunities for producing countries and companies,” he noted.
According to Guzmán, “as long as a large-scale conflict does not erupt, we may see copper prices rise to around US$5 per pound, which would represent approximately a 20% increase in revenues for producing companies.”
Nevertheless, both experts agree that if instability persists or intensifies, it could result in a “black swan” event—one that disrupts global economic performance, reduces demand for copper, and ultimately drives prices down.
In such a case, they warn, the current optimistic forecasts for the copper market would likely require significant adjustment.
Source: Diario Financiero