Copper prices traded lower on Monday amid the escalation of the US-Iran war in the Middle East, with Tehran once again closing the vital energy corridor of the Strait of Hormuz.
London Metal Exchange (LME) benchmark three-month copper declined 0.64% to $13,398.5 a metric ton. The most-traded copper contract on the Shanghai Futures Exchange fell 0.68% to 103,100 yuan ($15,199.54) a ton.
In the domestic market, copper prices on the Multi Commodity Exchange (MCX) for July futures contracts traded 0.06% higher at ₹1,294.35 per kg. During the session, MCX copper prices slipped as much as 0.75% to an intraday low of ₹1,283.80 level.
Why are copper prices falling?
Copper prices declined amid a broad-based sell-off across global commodity markets following the renewed escalation of the US-Iran war in West Asia. The two countries exchanged heavy missile and drone strikes over the weekend, triggering a risk-off sentiment among investors.
The heightened geopolitical tensions pushed energy prices higher, with Brent crude rising 2.79% to $78.13 per barrel. The surge in crude oil prices has revived concerns that elevated energy costs could fuel inflation, prompting central banks to keep interest rates higher for longer.
A prolonged high-interest-rate environment typically dampens economic activity and industrial demand, weighing on base metals such as copper.
Meanwhile, gold and silver prices also came under pressure as the US dollar strengthened modestly over the weekend. A firmer greenback makes dollar-denominated commodities, including copper, more expensive for holders of other currencies, reducing demand and exerting downward pressure on prices.
