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Copper Holds Near Records as Iran Risks Fail to Dent Supply Deficit
Copper's resilience despite Middle East tensions reflects a structural supply deficit that is insulating the metal from risk-off moves, supporting commodity currencies like AUD and CAD.
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Iran-related geopolitical risks are rising. Copper prices, however, are barely moving. The red metal continues to trade within sight of its record peak, according to a note from Commerzbank. That resilience is not a coincidence. A deep supply deficit, compounded by years of mining underinvestment, has created a floor that even escalating Middle East tensions cannot easily crack.
The simple read is that copper normally sells off when global risk aversion spikes. The better read is that copper’s supply constraints are now so acute that only a direct disruption to major producing regions would justify a sustained drop. Iran’s role in the copper market is indirect. The Strait of Hormuz is a chokepoint for oil, not copper. A wider conflict could dent industrial demand. The market, instead, is focused on the physical shortage of metal.
AUD/USD and the Commodity Currency Wedge
Copper is a bellwether for Australia’s dollar. Australian mining exports account for a significant share of GDP. When copper holds near record highs, the AUD/USD pair tends to find support, particularly against a US dollar that is increasingly priced for a patient Federal Reserve. The Loonie also benefits. Canada’s copper output, concentrated in British Columbia and Ontario, gives CAD a sensitivity to copper prices that often gets understated relative to oil.
AUD/USD failed to break below 0.6500 during the recent risk-off bout. That price action suggests commodity-linked demand is offsetting geopolitical jitters. For CAD/JPY, the yen’s safe-haven bid has kept the cross in check. Copper’s resilience provides a reason to stay long the Canadian dollar against the yen on dips, provided the Bank of Japan does not surprise with a hawkish shift.
The Supply Deficit That Blocks a Breakdown
The copper market has been in a structural deficit since 2021. Mine output has repeatedly missed forecasts. Key projects in Chile and Peru face grade depletion, water shortages, and community opposition. At the same time, demand from the energy transition – electric vehicles, grid upgrades, data centers – continues to outpace expectations. This combination creates what commodity strategists at Commerzbank describe as a market that can absorb temporary demand scares without a sharp repricing.