Middle East conflicts reignite inflation fears, copper trends under pressure [SMM copper morning comment]

SMM, July 13: Last Friday night, LME copper opened at $13,490/mt, initially fell slightly to $13,453.1/mt, then drifted higher and touched a high of $13,520/mt, finally settled at $13,484.5/mt, up 0.03%. Trading volume reached 14,000 lots, open interest reached 248,000 lots, up 762 lots from the previous trading day, as bulls increased positions. The most-traded SHFE copper 2608 contract opened at 103,540 yuan/mt, initially rose slightly to 103,960 yuan/mt, then drifted lower and dipped to 103,400 yuan/mt, finally settled at 103,790 yuan/mt, up 0.08%. Trading volume reached 22,000 lots, open interest reached 147,000 lots, down 1,953 lots from the previous trading day, as bears reduced positions. On the macro front, the reignited Middle East conflict heightened inflation concerns, while the US Fed's semi-annual report confirmed that inflation accelerated further in the spring and stated it was ready to use all tools to achieve its dual mandate, bolstering market expectations that the US Fed will tighten monetary policy. Geopolitically, the US military conducted two airstrikes on Iranian facilities. Trump said Iran agreed to a "perfect deal" yesterday but then opened fire. Iran launched lightning strikes on multiple US military facilities and announced the closure of the Strait of Hormuz. However, the US military said the southern shipping lane remains "open". The US-Iran conflict escalated sharply. Israel has not yet joined the fight. Oman proposed a "dual-lane" management of the strait passage, but the overall situation has become tense. Affected by rising inflation expectations and surging geopolitical risks, copper prices are under pressure in the short term. Fundamentally, the supply side was generally tight, mainly due to limited arrivals of imported and domestic supplies. Demand side, when copper prices pulled back, downstream purchases increased somewhat, but transactions weakened again after the price rebound, with overall activity dominated by restocking for immediate needs. Overall, copper prices are expected to drift lower with small fluctuations today.