Copper price caught in a tug of Iran war

Copper’s record run has been stopped in its tracks by global energy supply concerns brought on by the US-Israel war with Iran.

The red metal’s price could well grind lower too if the war becomes a prolonged conflict, with Citi for one predicting copper could fall to below US$12,000/t.

It said disruption and damage to energy infrastructure and shipments would drive a copper positioning unwind on fading Fed rate cut and cyclical growth expectations.

“Base metals have mostly bearish exposure to an ongoing conflict as fears of an energy supply shock drive a repricing of rate-cut expectations on inflationary pressures, and dollar strength,” Citi noted.

As it is, copper started off 2026 with a bang, racing off to an intra-day all-time high of $US14,527/t in late January before settling in a well-supported US$13,000/t-plus groove in February.

Before the missiles began flying across the Persian Gulf on February 28, the metal was doing nicely at US$13,439/t. It has since retreated to $US12,955/t (LME 3-month), down 3.6% on its pre-war level.

Having said that, the thought of looming supply deficits in response to the electrification of everything, falling grades at the major mines, and lengthy development timelines for new mines, means the current price has had no trouble remaining 30% ahead of the CY2025 average of US$9,954/t.

And while Citi forecasts material downside risk to the copper price while the war continues, its base case expectation is that the conflict eases within weeks, and copper rebounds to  US$13,500/t- US$14,000/t within three months.

It also noted that while not as critical as oil continuing to flow from the gulf, the conflict does pose some copper supply risks as Iran accounts for about 1.8% (410,000t) of global copper supply.

“We don’t anticipate disruption to these operations in our base case, but it remains a tail risk,” Citi said.

The same could be said for oxide copper operations which rely on sulphuric acid supplies to keep ticking over. If sulphur supplies from the gulf region are halted, they will have to sit on their hands for a while, making for another tail wind for the copper price while the Middle East is at war.

Copper juniors:

It is against the above background that the ASX-listed copper juniors find themselves in an interesting space.

The current price gives their copper development ambitions real momentum. If the price were to go higher still in a post-war environment, all the better.

Unlike their gold cousins, where $1 billion market caps are being handed out willy nilly to the developers and the advanced explorers, the copper juniors have yet to capture the upside that should flow from the copper price being in record territory.

Their share prices have nevertheless been resilient in the face of the broad share market wobbles brought on by the war. It’s just that where there has been share price retracement, it should have been from higher levels.

Still, there now seems to be a real prospect of either a relief rally for the copper stocks should the war not drag on and failing that, the potential for copper price tailwinds from supply disruption at the Iranian copper operations and/or the impact of sulphur shortages on oxide copper operations.

AusQuest:

AusQuest (AQD) is one the copper juniors that has been holding its value in the war environment but which should probably be carrying a higher rating thanks to the emerging big-time story at its Cangallo porphyry copper-gold project in Peru.

Broad spaced drilling has now defined a corridor of continuous mineralisation extending along strike for 1.5km, 250-500m in width and to a depth of more than 400m, with the footprint expected to get bigger still with more drilling.

So it is shaping up as a big tonnage discovery which because of extensive near-surface copper oxide mineralisation, suggests the potential for a “starter” pit feeding a low capex heap-leach operation, in the first instance.

Then there is the potential for higher-grade depth extensions to the copper sulphide mineralisation which will be put to the test in a diamond drilling program due to start next month.

In Thursday’s market, AusQuest was trading at 4.5c for a market cap of $72m.

Euroz Hartleys has a 12c price target on the stock, saying Cangallo continues to build in scale and economic potential.

“The additional drilling will continue to extend mineralisation, adding to what we believe is already a significant new copper discovery with substantial resource potential,” the broker said.

It said the company had clearly demonstrated that the system hosts discrete higher‑grade copper zones, with results increasingly pointing toward the southern area as the likely location of the system’s core.

“This will be the key focus of the next drilling phase, as the southern trend exhibits the hallmark features of the main intrusive and potentially higher‑grade mineralising centre,” the broker said.

As it is, drilling to date has delivered multiple broad copper intervals of more than 0.5% copper across the corridor (including 68m at 0.52% copper and 30m at 0.6% copper).

Low-grade but large-scale porphyry-type copper deposits are the source of most of the world’s copper production and come into their own thanks to their ability to deliver multi-decade large-scale operations in the bottom half of the cost curve.

Cangallo has an advantage over the Peru’s remote and high-altitude copper projects and those elsewhere in the Andes as it is only 8km from the coast and 25km east of the fishing and mining town of Chala.

Coda (COD):

The suggestion that stock market valuations of the copper juniors had not kept pace with the metal’s move into record territory was highlighted last month by Coda Minerals (COD).

In response to shareholder queries, Coda recast key valuation metrics used in its August 2025 scoping study into the development of its Elizabeth Creek copper-silver project in South Australia to reflect both copper and silver price moves since.

Instead of using the US$9,260/t copper price assumption in the August 2025 study, Coda plugged in US$10,500/t copper. Instead of US$30/oz silver, it plugged in $US60/oz.

Elizabeth Creek is being planned as the annual producer of 31,000t of copper and 1.4Moz of silver.

Both updated prices are well below current pricing. Even so, the impact on the scoping study numbers is telling, with the estimated pre-tax NPV of $1.29 billion and IRR of 39% in the August 2025 study rising to a re-stated $2.25b and 56%.

Coda was trading in Thursday’s market at 19c for a market cap of $71m. While that is up strongly on the back half of last year, and ahead of its pre-war price of 17.5c, a re-rating in a post-war world seems likely.

Caravel (CVV):

Caravel (CVV) is another copper developer where the full value of the company’s project in a record copper price environment is yet to be reflected in its share price, war or no war.

It is well on its way to becoming Australia’s next big copper producer from its namesake project near the town of Wongan Hills in Western Australia’s central wheatbelt region.

The project is of the low-grade/bulk tonnage type, with planned annual production of 65,000t of copper and 1,000tpa of cobalt, with gold and silver credits.

A definitive feasibility study is expected in June and a final investment decision towards the end of the year.

Caravel was trading in Thursday’s market at 37.5c for a market cap of $210m. At the proposed production level, a market cap measured in the billions is in the offing at current copper prices.

But Caravel needs to finance the project. When completed it will trigger a re-rate to producer-type multiples.

On that score, the company has struck an alliance with Indian conglomerate Adani on a possible offtake agreement, as well as a potential investment in the project or Caravel itself. An Adani affiliate owns a new 500,000tpa copper smelter in Gujarat which needs to secure long-term concentrate supplies in what is already a very tight market.