Copper prices experienced significant declines as geopolitical tensions escalated in the Middle East. According to latest reports, benchmark three-month copper on the London Metal Exchange slipped 0.72% to $13,387 a metric ton by 0300 GMT, while the most-traded copper contract on the Shanghai Futures Exchange lost 0.75% at 103,030 yuan 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, though they slipped as much as 0.75% to an intraday low of ₹1,283.80 level during the session. Meanwhile, gold futures dropped 1% to ₹1.42 lakh per 10 grams on MCX as renewed US-Iran conflict lifted oil prices, strengthened the dollar and hurt bullion demand. However, oil prices have since retreated, with Brent Oil Futures rising 3.5% to $78.68 a barrel and Crude Oil WTI Futures climbing 3.5% to $73.89 a barrel after both contracts had surged by nearly 5% earlier in the session. As per The Hindu BusinessLine, August crude oil futures on WTI were trading at ₹7,657 on MCX during the initial hour of Thursday trading, up 0.62% from the previous close of ₹7,610.
The copper price decline was triggered by renewed escalation of the US-Iran war in West Asia, with Tehran once again closing the vital energy corridor of the Strait of Hormuz. As reported by Livemint, U.S. and Iranian forces exchanged heavy missile and drone assaults over the weekend, dampening risk appetite and rekindling fears that higher energy prices and inflation levels could prompt policymakers to keep interest rates higher for longer. The geopolitical tensions have created uncertainty in global markets and contributed to the broad-based sell-off across commodity markets. According to PTI, the escalation followed fresh US strikes on Iranian targets after attacks on commercial vessels in the Strait of Hormuz, while uncertainty over the status of ceasefire negotiations and temporary closure of the waterway continued to support crude oil prices. The latest developments saw Iran on Sunday expanded missile and drone attacks to Gulf states including Qatar and the United Arab Emirates in retaliation for U.S. military strikes, with Tehran also declaring the Strait of Hormuz closed after a commercial vessel was hit. As per The Hindu BusinessLine, US Central Command confirmed that US forces struck Iranian command centres, air defence sites, missile and drone capabilities, and coastal surveillance facilities to further degrade Iran's ability to threaten innocent mariners crewing commercial vessels transiting the Strait of Hormuz.
The Middle East tensions have created a critical energy crisis in Europe, with jet fuel supplies running dangerously low. According to Energy Aspects data, Europe faces a deficit of 600,000 barrels per day in the third quarter, compared to surpluses of 116,000 barrels per day in the United States and 425,000 barrels per day in Asia-Pacific. Europe has less than 30 days' supply to cover demand, making it the tightest jet fuel market globally. The International Energy Agency reports that jet fuel stock at end-May was 10% higher than the previous year, with refinery production rising 30%, but this provides only one-month leeway. European Commission Energy Commissioner Dan Jorgensen acknowledged the situation could worsen as the holiday season approaches, with Brussels prepared to coordinate national reserve releases if necessary. The Strait of Hormuz serves as the primary export route for crude from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and other Gulf producers, with any sustained disruption potentially forcing refiners, particularly in Asia, to seek alternative supplies and push freight and insurance costs higher. According to The Hindu BusinessLine, tanker traffic through the Strait of Hormuz remains depressed, with crossings still under clear pressure due to the ongoing geopolitical tensions.
Recent US Energy Information Administration (EIA) data reveals significant inventory changes that could impact global energy markets. According to the EIA, US commercial crude oil inventories decreased by 1.7 million barrels for the week ending July 10, bringing total inventories to 409.7 million barrels, about 6% below the five-year average for this time of year. Total motor gasoline inventories decreased by 1.5 million barrels and were 8% below the five-year average, while distillate fuel inventories increased by 4.6 million barrels and were about 11% below the five-year average. Total products supplied in the US over the last four-week period averaged 20.3 million barrels per day, up 0.3% from the same period last year. As per The Hindu BusinessLine, US crude inventories dip adds to concerns about market vulnerability amid potential renewed supply disruptions. The report notes that global SPR (strategic petroleum reserve) releases, which have helped the market out over recent months, are set to end in the next few weeks, potentially leaving the market more exposed to supply disruptions.
The geopolitical tensions have created significant market volatility, with the India VIX surging 7.54% to 13.18, signalling a sharp rise in volatility expectations as investors reacted to the escalating Middle East tensions. Among Sensex constituents, NTPC, HCL Technologies, TCS, Power Grid and Sun Pharma were the top gainers in early trade, while InterGlobe Aviation (IndiGo) dropped nearly 2%, followed by Tech Mahindra, UltraTech Cement, Eternal, Maruti Suzuki and State Bank of India. The broader market also remained under pressure, with mid-cap and small-cap indices declining alongside the benchmark indices. The Nifty Midcap 100 declined 0.64%, while the Nifty Smallcap 100 fell 0.68%, with the Nifty 500 down 0.79%, indicating broad-based weakness across the market. The broader commodity weakness reflects the market's risk-off sentiment amid escalating Middle East tensions, though the latest oil price retreat has provided some relief to energy-sensitive metals like copper.
