Copper leads base metals lower as Middle East tensions flare up

Copper and zinc prices fell on Wednesday as Middle East tensions escalated, with U.S. forces striking Iran and Iran firing at American bases, sparking concerns of higher oil prices and inflation. Copper, a benchmark, dropped 1% to $14,133 a metric ton on the London Metal Exchange, reaching its lowest since August 21 and breaking below support at the 21-day moving average of $14,162.

Analyst John Meyer noted that all base metals were softer due to rising oil prices from the renewed conflict between the U.S. and Iran. The dollar surged to a two-week high as the war between Tehran and Washington intensified, since July. Copper retreated for the second day after hitting a seven-month high of $14,441.50 the previous day, pressured by the stronger dollar and expectations of a September interest rate hike by the U.S. Federal Reserve.

Meyer emphasized the likelihood of a rate increase, which would make dollar-denominated metals more expensive for buyers using other currencies. Zinc also declined 1.7% to $3,856, reaching a four-year high of $3,990 on Tuesday due to speculative buying and tight inventories outside China, as LME data indicated less tightness in supplies, narrowing premiums for cash metal over three-month contracts.

Tin lost 0.9% to $54,090, while nickel dipped 0.4% to $16,595, and aluminum fell 0.7% to $3,256.50, while lead decreased 0.9% to $1,901.50.