Escalation of Middle East conflict drags down industrial metals; LME index previously hit a record high

With escalating hostilities in the Middle East highlighting persistent headwinds, industrial metal prices have pulled back after a key price gauge on the London Metal Exchange (LME) soared to a record high. The LME index tracking six major base metals reached a historic peak on Tuesday, with copper prices surging to new highs, aluminum prices extending their rally, and zinc trading above $4,000 per ton for the first time since 2022. Supply-side issues have played an important role in this uptrend, but US-Iran conflict still poses risks to prices by threatening global growth. In the latest escalation, the US military stated it destroyed five Iranian oil tankers carrying crude following Tehran’s attempt to target a US Navy vessel. In response, the Islamic Revolutionary Guard Corps announced today that it struck two US warships and eight oil tankers in retaliation for US strikes against Iranian tankers in the Persian Gulf, and also targeted ten non-compliant vessels. Brent crude rebounded to near $100, intensifying inflation fears ahead of Friday’s US CPI release.