The conflict between the US and Iran has resumed! Expectations of interest rate hikes are heating up, and demand prospects are overshadowed by the general decline in basic metal prices

The Zhitong Finance App learned that with another outbreak of conflict between the US and Iran, rising expectations of interest rate hikes and concerns about global economic growth prospects have led to a general decline in basic metal prices. As of press release, Luntong futures fell 0.90% to 13,381 US dollars/ton; Lunan aluminum futures fell nearly 2% to 3140 US dollars/ton; Lunzinc futures fell 0.7%.

The US Central Command said on July 11 that the US military completed its third attack on Iran that day. The US military attacked about 140 Iranian military targets, including missile and drone launch sites, naval equipment, ammunition storage facilities, communication networks, and coastal surveillance stations. Iran then announced a series of attacks against US military targets in the Middle East region. Earlier, on the 7th and 8th, the US military launched military attacks on Iran for two consecutive days in response to Iran's recent attack on merchant ships passing through the Strait of Hormuz, while Iran launched missile and drone attacks on US facilities in countries such as Bahrain, Kuwait, Qatar, and Jordan.

Meanwhile, the US and Iran made conflicting statements about the transit situation in the Strait of Hormuz. Later on July 12, Iran's Persian Gulf Strait Authority issued a notice reaffirming that the Strait of Hormuz is currently impassable. After the situation calms down, it will resume reviewing applications for passage through the strait and issue the necessary permits according to the plan. The US military said “traffic continues” through the strait.

The latest round of conflict between the US and Iran has heightened market concerns about rising energy costs and prolonged disruptions in the supply of various commodities from the Persian Gulf region. These factors may further drive up inflation and push central banks to tighten monetary policy, the most important of which is the Federal Reserve — the central bank's monetary policy will affect the US dollar, which in turn affects various commodities denominated in US dollars, including industrial metals.

This week, traders will pay close attention to key inflation data such as consumer prices and wholesale prices in the US for June. This will be the last batch of inflation data released by the Federal Reserve before holding an interest rate meeting later this month, so it will provide an important clue for evaluating future interest rate prospects. Economists expect that the overall US consumer price index (CPI) in June and the core CPI excluding food and energy prices will both slow slightly from May, but the two indicators will still be significantly higher than the Federal Reserve's 2% inflation target. Additionally, investors will also pay attention to Walsh's first congressional testimony since becoming chairman of the Federal Reserve, which is expected to take place on Tuesday.

Meanwhile, traders have further raised their bets on the Federal Reserve's tightening monetary policy. The interest rate swap market currently predicts that by December of this year, the Federal Reserve's cumulative rate hike will be close to 40 basis points, higher than the 15 basis point forecast at the beginning of June. For manufacturing companies, higher financing costs often dampen demand for industrial metals.

Since copper is generally regarded as a weather vane for global economic growth, copper prices have fluctuated within a relatively narrow range since the US reached an interim peace agreement with Iran last month. Galaxy Futures said in a report released on Monday that due to another escalation of tension, market expectations for interest rate hikes have diverged, leading to increased market volatility. However, the agency believes that in the long run, the fundamentals of the copper market are still “relatively healthy,” and supply prospects and continued growing demand in the fields of artificial intelligence (AI) and energy storage will continue to support the long-term trend of copper prices.