Since late January 2026, escalating geopolitical tensions, culminating in the Iran–US–Israel conflict and the closure of the Strait of Hormuz, have significantly altered the global macro environment.
The resulting surge in energy prices has:
- Reignited inflation concerns
- Reduced expectations for monetary easing
- Increased volatility in global risk appetite
As of end-March, metals markets have corrected from historically elevated levels. Compared with pre-conflict levels (February 27, 2026), prices declined as follows:
The correction reflects a macro-driven repricing and positioning unwind, rather than a deterioration in underlying fundamentals.
Fig 1 | Commodities prices (indexed, price of Feb 27, 2026 = 100)
Source: LME, GFEX, Appian Capital Advisory
Gold/Silver
Since the Strait of Hormuz closure, surging oil prices have fueled inflation rebound fears, undercutting expectations for Fed rate cuts that had been building since 2025. This is reflected in the gold and silver market, where investor interest has notably cooled down. As of March 27th, net long positions held by COMEX money managers fell to their lowest level since March 2024. Gold ETFs also recorded significant outflows in March (data up to March 20th). After surging to historical highs above US$5,300/oz and US$110/oz respectively in late January, gold and silver prices retreated to around $4,500/oz and $70/oz by late March.
Fig 2 | Gold ETF outflows surged in March 2026 (updated to March 20th)
Source: WGC, Appian Capital Advisory
Copper
In January and February, copper prices surged to historical highs even as inventories piled up to record levels – with SHFE stocks rising from 140kt to 400kt over the two months. However, when prices sold off in March, SHFE destocked by 50kt in the week of March 23rd, pointing to resilient downstream demand in China.
The spot TC for China’s imported copper concentrate has remained negative since February 2025, forcing smelters to rely on revenue from by-product (acid) to maintain operation. Concentrate supply remains tight relative to smelting capacity, especially against the backdrop of rising resource nationalism and supply chain fragmentation.
As a result, market focus has become less sensitive to headline inventory data and more attuned to marginal shifts in macroeconomic expectations, as well as the strategic value of physical assets.
Additionally, a key risk to monitor is that sustained disruption to the Strait of Hormuz could tighten sulfuric acid supply, thereby potentially disrupting African SX-EW copper cathode production.
Fig 3 | Copper stocks on exchanges reached historical high levels
Source: LME, SHFE, COMEX, Appian Capital Advisory
Zinc
In March, Teck Resources and Korea Zinc agreed to set treatment charges (TCs) for zinc concentrates at US$85/t for 2026 1, indicating sustaining tightness in concentrate market. Meanwhile, spot TCs for imported zinc concentrate in China have fallen to near zero and even negative. Zinc smelters’ revenues now rely heavily on by-products, including sulfuric acid, indium, and cadmium.
The situation in the Middle East has not yet directly impacted zinc fundamentals. Nevertheless, considering that producing one ton of zinc requires 3,000-4,000 kWh of electricity, if higher energy costs are passed through to industrial electricity tariffs, zinc smelters in affected regions would face operational disruption risk.
Fig 4 | Spot zinc concentrate TCs stayed at low levels
Source: SMM, Appian Capital Advisory
Nickel
Rising costs combined with Indonesia’s tightening nickel ore policy have narrowed the expected nickel surplus, providing stronger cost support for nickel prices. Up to now, approval progress for 2026 nickel ores’ RKAB (Work Plan and Budget) quota in Indonesia remains slow. Additionally, the Indonesian government is planning to implement an export tax on nickel 2 and adjust the benchmark price for nickel ore 3 to increase revenue from other by-products including cobalt. Furthermore, affected by the rainy season and rising oil prices, Philippines’ nickel ore prices also continued to climb during the first quarter.
Fig 5 | Nickel prices being supported by rising ore costs
Source: SMM, Appian Capital Advisory
Lithium
The lithium market showed further signs of tightening in the first quarter, amid lingering supply disruption risks and robust demand growth. China’s monthly lithium carbonate inventories fell by 40% in the fourth quarter of 2025, and remained at two-year lows during the first two months of this year (SMM).
On the supply side, China’s Jianxiawo lepidolite mine remain suspended due to stringent approval process. Also, following Zimbabwe’s late-February ban on lithium resource exports, no export permits had been approved by the end of March. Additionally, lithium mining and shipments could face disruption risks should diesel supply remain tight in resource-rich countries such as Australia in the coming months.
From a downstream consumption perspective, China’s cumulative production of power batteries and energy storage batteries reached 309.7 GWh in January-February 2026 (+48.8% YoY). Meanwhile, the average battery capacity per new energy vehicle in China reached 64.9 kWh in January-February 2026 (+32.3% YoY). The trend is driven by factors including improvements in battery performance, a rising share of BEVs (relative to PHEVs), and the electrification of commercial vehicles (including increased penetration of electric heavy-duty trucks). Against this backdrop, growth in power battery demand is no longer solely tied to vehicle sales volumes, providing additional support for lithium demand in short-to-medium term. Moreover, the recent uptick in crude oil and refined product prices has further reinforced market expectations for battery and new energy vehicle demand growth.
While short-term volatility is expected to persist, particularly in response to macro developments, the medium-term outlook for metals remains constructive.
The combination of rising cost support, constrained supply, and structural demand growth suggests that the recent correction is unlikely to signal a sustained downturn in the metals cycle.
Fig 6 | China’s average battery capacity per EV trended higher
Source: CAEV, Appian Capital Advisory
Outlook
Despite the recent correction in metals prices, underlying fundamentals across most commodities remain broadly supportive as several structural factors continue to provide medium-term support:
- Elevated energy prices are raising the marginal cost of production
- Supply constraints persist across key commodities, driven by resource nationalism and permitting challenges
- Demand from electrification and energy transition remains robust, particularly for copper and lithium
