NextFin News - Copper prices retreated from their highest levels since February on Thursday as the geopolitical premium baked into industrial metals began to dissolve, leaving traders to navigate a volatile "limbo" state in the conflict between the U.S. and Iran. Benchmark three-month copper on the London Metal Exchange fell 0.7% to $12,349.50 per metric ton, reversing a brief rally that had pushed the metal toward the $13,000 threshold earlier in the week. The decline reflects a market increasingly exhausted by the lack of clear direction in the Middle East, where stalled peace negotiations have failed to resolve the standoff over the Strait of Hormuz.
The current price action is heavily influenced by the shifting expectations of Nicholas Snowdon, a metals strategist at Goldman Sachs who has maintained a structurally bullish outlook on copper for several years. Snowdon argues that while the immediate war premium is fading, the underlying supply deficit remains acute. However, his view that copper will average $11,400 for the full year of 2026—implying a significant correction from current spot levels—suggests that even the most prominent bulls are bracing for a period of speculative unwinding. Snowdon’s analysis often focuses on the "green transition" as a floor for prices, but in the current environment, his projections are being tested by the reality of high interest rates and an energy-led inflation shock.
This cautious stance is not yet a consensus on Wall Street. While Goldman Sachs prepares for a potential dip toward the $11,000 range, analysts at JPMorgan Chase have held to a more aggressive Q2 target of $12,500, citing the risk of a total blockade in the Persian Gulf. The divergence between these two major institutions highlights the speculative nature of the current market; positioning data shows that LME net long positions are currently at the 80th percentile, a level that historically precedes a sharp correction if the anticipated supply disruptions do not materialize. The market is effectively caught between a structural shortage and a geopolitical stalemate that has yet to turn into a full-scale supply catastrophe.
The broader commodity complex is feeling the weight of this uncertainty. Spot gold (XAU/USD) was trading at $4,704.725 per ounce on Thursday, maintaining its status as a primary hedge against the "inflation shock" triggered by the conflict. Simultaneously, Brent crude oil stood at $103.45 per barrel, a price level that continues to feed into the production costs of energy-intensive metals like copper and aluminum. The positive correlation between copper and real yields, which typically moves in opposite directions, has flipped in recent weeks. Both are rising together, signaling that investors are buying copper not as a bet on global growth, but as a protection against the inflationary consequences of a prolonged war.
Risk factors for the copper market are now skewed toward the downside if a diplomatic breakthrough occurs. A sudden reopening of the Strait of Hormuz or a formal ceasefire would likely trigger a massive liquidation of the speculative length currently held by hedge funds. Conversely, the World Steel Association has already begun cutting global demand forecasts for 2026, citing the drag that high energy prices are placing on industrial activity in Europe and Asia. If the war in the Middle East remains in its current state of limbo—neither escalating into a global conflagration nor resolving into peace—the "scarcity narrative" that drove copper to its February highs may find itself undermined by a slowing global economy that simply cannot afford the metal at these prices.
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