Base metals came under renewed selling pressure on Wednesday, led by copper and zinc, as an escalation of hostilities in the Middle East rattled global markets and raised concerns that rising oil prices could reignite inflation and delay monetary easing.
Benchmark three-month copper on the London Metal Exchange (LME) fell 0.3 percent to $14,226 per metric tonne in official open-outcry trading, after touching $14,092, its lowest level since August 21.
The decline extended copper’s retreat for a second consecutive session after the industrial metal climbed to a seven-month high of $14,441.50 on Tuesday.
The sell-off reflected growing investor anxiety over the economic consequences of escalating military exchanges between the United States and Iran, with US forces striking Iran and Tehran responding with attacks on American bases across the region.
The conflict has heightened concerns that disruptions to energy markets could push oil prices higher, feeding inflationary pressures and complicating the outlook for global interest rates and economic growth.
“All the base metals are softer on the back of higher oil prices caused by the renewed conflict between the US and Iran,” said John Meyer, an analyst at SP Angel.
The dollar climbed to a two-week high as the conflict intensified, adding further pressure to commodities priced in the US currency.
A stronger dollar makes dollar-denominated metals more expensive for holders of other currencies, potentially weakening demand. It also compounds concerns around the outlook for global industrial activity, particularly as investors increasingly price in the possibility of further monetary tightening in the United States.
Meyer said expectations were growing that the US Federal Reserve could raise interest rates in September.
“It’s increasingly likely that the Fed will raise rates,” he said.
Higher borrowing costs can weigh on sentiment towards industrial metals by slowing investment and economic activity, thereby weakening expectations for future demand.
Zinc was among Wednesday’s biggest decliners, falling 1.2 percent to $3,875 per metric tonne in official LME trading.
The metal had risen to a four-year high of $3,990 on Tuesday, supported by speculative buying and tight inventories outside China.
However, fresh warehouse data pointed to some easing in supply concerns.
Daily LME figures showed small inflows of both copper and zinc into exchange-registered warehouses, offering tentative evidence of less severe supply tightness.
The additional stocks helped narrow premiums for cash metal over three-month contracts in both markets, reducing some of the urgency among buyers seeking immediate supplies.
Elsewhere in the complex, tin fell 0.6 percent to $54,290 per metric tonne, after touching a one-month low of $53,850.
Nickel edged down 0.1 percent to $16,650, recovering some ground after earlier falling to $16,500, its lowest level in seven weeks.
Aluminium declined 0.9 percent to $3,253, while lead fell 0.8 percent to $1,904.
