(Bloomberg) — Base metals fluctuated at the end of the week as the threat of an escalating conflict in the Middle East — and more turbulence for the global economy — kept a lid on optimism.
While copper, aluminum and zinc all headed for weekly gains, trading has been cautious in recent days after Iran-backed Houthi rebels in Yemen attacked vessels in the Red Sea. The widening conflict at one point sent Brent crude back above $100 a barrel, potentially fueling inflation that may trigger higher interest rates.
“The metals complex has been relatively weak in July as ongoing military skirmishes in the Middle East generate fresh uncertainty for the global economy,” according to a note from BMI, a unit of Fitch Solutions. “This has reduced the prospect of near-term rate cuts and raised the risk of a stronger US dollar and higher bond yields.”
Metal traders are torn between the geopolitical uncertainty and signs that demand is running ahead of supply. Copper is still up around 10% this year on the London Metal Exchange, helped by a big outflow to the US and some supply pressure in China. The metal neared $14,000 a ton earlier in the week.
For copper, the market has been focused on the possibility that the Trump administration will impose levies on imports of the metal. The US Department of Commerce was supposed to hand President Donald Trump fresh recommendations on levies more than three weeks ago, but no decision has been unveiled so far.
Copper was was 0.3% higher at $13,636 a ton on the London Metal Exchange at 1:20 p.m. local time, while aluminum fell 1% and zinc was down 0.5%.
–With assistance from Jack Ryan.
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