Copper prices surged to their highest levels in two weeks on Thursday, with the red metal settling 1.3% higher on the London Metal Exchange. According to reports from Bloomberg, the rally was driven by speculation that the US and Iran are nearing a diplomatic resolution to the Middle East conflict that has shaken global markets. A US source familiar with the matter confirmed that Iran and the US reached a tentative deal to extend a ceasefire and work toward an agreement to end the war. Latest reports from Axios indicate the deal has now been finalized, with the 60-day memorandum of understanding (MOU) requiring only President Trump's approval.
The finalized agreement includes comprehensive provisions that address both military and economic aspects of the conflict. As reported by Axios, citing two US officials, the 60-day MOU will include 'unrestricted' shipping through the critical Strait of Hormuz and the lifting of an ongoing US naval blockade of Iran's ports and coastline. The deal also includes a commitment by Iran to not pursue a nuclear weapon, addressing longstanding concerns about Tehran's nuclear program. Iranian media had reported that an unofficial draft would see Tehran restoring commercial shipping through the Strait of Hormuz to pre-war levels within a month, with Iran and Oman jointly managing traffic. However, Trump later dismissed these reports, stating that no single country could control the vital waterway.
Despite the diplomatic progress, recent military actions have highlighted the ongoing tensions in the region. According to US Central Command, Iran launched a ballistic missile towards Kuwait on Wednesday that was successfully intercepted by Kuwaiti forces. CENTCOM reported that Iranian forces launched five attack drones in and near the Strait of Hormuz, with all drones successfully intercepted by US forces. Iran's state media confirmed that the country's armed forces fired warning shots at four ships attempting to cross the strait without navy supervision, forcing them to turn back. These attacks marked a potential resumption in open hostilities between the US and Iran, with the US military claiming the actions were in 'self defense' while maintaining that a ceasefire remains in effect.
Oil futures experienced a slight decline on Thursday amid hopes for the potential US-Iran ceasefire deal, though Vice President JD Vance's cautious remarks provided support to prices. According to The Hindu BusinessLine, Brent crude futures for July fell 35 cents to $93.36 a barrel, while U.S. oil futures dropped 63 cents to $88.27 a barrel. The more actively traded August Brent futures declined 46 cents to $92.24, with prices down more than 8% for the week. Vance told reporters that while the nations were 'close' to reaching a deal but 'not there yet', the U.S. was in a position where it could substantially set back Tehran's nuclear program. He identified couple of sticking points in talks with Tehran concerning its enriched uranium stockpile and enrichment capabilities, stating he couldn't guarantee success but felt 'pretty good about it'.
The optimism surrounding a ceasefire deal spilled into other corners of the copper market, with investors of exchange-traded funds betting that miners will benefit from a rally in metal prices. According to Bloomberg, traders bought 21,000 bullish options spreads on the Global X Copper Miners ETF on Thursday, on hopes the fund could rise sharply by September. The trade stands to profit if the ETF climbs above $100, with gains capped once it reaches $120. Copper settled at $13,701.50 a metric ton in London, while all other LME metals gained, with zinc advancing 1.1% and nickel rising 0.8%. The broad-based rally across base metals reflects investor confidence in the potential diplomatic resolution and its implications for global economic growth prospects.
