Copper hits one‑month high on easing risk outlook and hopes for US–Iran talks
Prices extend four‑day rally
Copper prices climbed to a one‑month high this week, rising for a fourth straight session and gaining 5.67% over the past week to settle at $6.10 per pound, according to ING’s commodities team.
The move comes as industrial metals broadly advance on expectations of easing macroeconomic risks and the prospect of renewed diplomatic talks between the United States and Iran, which have improved sentiment toward cyclical assets.
Geopolitics remains key driver
Analysts said copper remains highly sensitive to geopolitical headlines. Hopes for a ceasefire extension in the Middle East and potential US–Iran negotiations, with Pakistan mediating talks that could resume in Islamabad, have underpinned the recent rally.
Ship traffic through the Strait of Hormuz, a critical energy and commodities corridor, is still down by more than 95% since the conflict began, highlighting ongoing logistical risks. A temporary ceasefire set to expire next Tuesday is seen as a crucial near‑term trigger for copper’s direction.
Market participants warned that any renewed hostilities or a spike in energy prices could quickly reverse the latest gains, making the upswing heavily dependent on perceived regional stability.
Macro backdrop: steady Fed, softer dollar
The broader macro environment is providing additional support. Federal Reserve officials are signaling that the benchmark interest rate will likely remain unchanged at 3.5%–3.75% at their meeting later this month. CME Group’s FedWatch tool shows a 98% probability of no move.
A steady rate outlook, paired with persistent inflation worries tied to the Middle East conflict, has weighed on the US dollar. The US Dollar Index has fallen 1.38% over the past month to around 98.2.
A weaker dollar typically benefits dollar‑denominated commodities such as copper by making them cheaper for buyers using other currencies, bolstering demand for risk‑sensitive assets. Analysts suggested that if tensions continue to ease, copper could gain further from anticipated rate cuts, a softer dollar, and stronger appetite for cyclical exposures.
Demand outlook tied to industrial resilience
The combination of calmer geopolitical expectations and a more predictable economic path is encouraging a shift back toward industrial metals, with traders positioning for resilient demand.
Analysts at ING noted that, under a scenario of continued de‑escalation in the Middle East, stronger physical demand for copper could emerge in the coming months, especially if global growth conditions stabilize and policy settings turn more supportive.
Still, they emphasized that this optimism rests on a fragile foundation. Any setback in ceasefire negotiations or a shift in central bank rhetoric could quickly unwind the positive momentum now priced into the market.
Supply chain strain: sulfuric acid emerges as bottleneck
While demand sentiment improves, supply‑side risks are intensifying. Sulfuric acid, a key input for solvent extraction–electrowinning (SX‑EW) copper production, has become a focal point of concern.
Roughly half of global seaborne sulfur shipments transit the Strait of Hormuz, and disruptions there are tightening sulfuric acid availability. Chinese sulfuric acid prices have surged about 90% since the Iran conflict began, sharply raising costs for refiners and squeezing downstream output.
Export restrictions linked to shipping constraints are amplifying supply risks for major copper producers such as Chile, Peru, and the Democratic Republic of the Congo, where sulfuric acid supply is closely tied to maintaining continuous ore processing operations.
Regional price pressure and output impact
In Northeast Asia, sulfuric acid prices have risen 21.3% amid strong demand and elevated feedstock costs, deepening pressure on regional refiners.
Chile, one of the world’s largest copper producers, saw its output fall to 378.55 thousand tonnes in February, down from the previous month. Analysts pointed to higher input costs and logistical challenges as factors that could curb future production if conditions persist.
Outlook: gains vulnerable to policy and conflict shifts
Market research highlighted two broad paths for copper in the near term. Under an easing‑tension scenario, stable or lower interest rates, a weaker dollar, and improving risk appetite could support both prices and physical demand.
However, renewed conflict in the Middle East, a breakdown in ceasefire talks, or a sharp rebound in energy prices could quickly cool sentiment. Combined with worsening sulfuric acid shortages, such developments could shift the focus away from demand optimism toward supply disruptions and macro uncertainty.
Traders are now watching three key variables: progress on US–Iran diplomacy, the duration of the current ceasefire, and the extent of sulfuric acid bottlenecks. Together, these factors are set to determine whether copper’s latest rally can be sustained or gives way to another bout of volatility.
Curious how macro events shape digital assets too? Explore crypto’s reaction in our guide to interest rates and Bitcoin.
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