Copper prices rose, with LME copper trading back above $13,000 per tonne as markets assessed the durability of the US-Iran ceasefire. Prices recovered on Tuesday afternoon after earlier losses, supported by improved risk sentiment.
Exchange inventories remained high, close to the highest level since 2013, which limited further gains. Market moves were linked to geopolitical developments and short-term news flow.
A prolonged closure of the Strait of Hormuz was identified as a key risk for metals. Such a closure could raise energy costs, increase inflation pressure, and reduce manufacturing demand, limiting upside for industrial metals.
For copper to move higher on a sustained basis, the report noted a need for stronger physical demand or inventory drawdowns. The article stated it was produced with help from an AI tool and reviewed by an editor.
Looking back to 2025, we recall a period when copper prices were highly sensitive to geopolitical news, especially concerning the US-Iran ceasefire. The market was stuck, with the risk of a Strait of Hormuz closure pushing prices up while very high exchange inventories, near their 2013 peaks, pushed them down. This created a headline-driven environment where fundamentals took a backseat to news alerts.
That experience from last year tells us to prioritize volatility strategies in the weeks ahead. As of today, May 6, 2026, the market is still choppy, meaning derivative plays like buying straddles or strangles could be effective. These strategies can be profitable from a large price move in either direction, which is perfect for a market reacting to unpredictable news.
The fundamental picture today has shifted slightly, providing different pressures. LME inventories, while down from their 2025 highs, are still substantial at around 280,000 tonnes, capping major price rallies. However, demand is getting a consistent boost from the green energy transition, with recent industry reports confirming global EV sales are on track to grow another 20% this year.
The main geopolitical focus for us now is not the Middle East, but potential supply disruptions from South America. We are seeing early reports of tense labor negotiations at major mines in Peru, which together with Chile, accounts for nearly 40% of global copper supply. Any hint of a strike there will cause immediate price spikes, similar to the headline risk we saw last year.
Given these conflicting signals, we should consider strategies that define our risk. Using option spreads like bull call spreads or bear put spreads allows us to make a directional bet on the outcome of these pressures while limiting our potential losses. This is a cautious way to trade a market that has strong underlying demand but is also facing significant inventory and geopolitical headwinds.
