In mid-June, the US and Iran signed a memorandum of understanding to cease hostilities. Crude oil and aluminium prices quickly retreated toward pre-war levels as markets priced in de-escalation and a reopening of the Strait of Hormuz, while broader risk appetite began to recover.
That easing proved short-lived. Within weeks, Iran shut the Strait again over disputed Israeli strikes in Lebanon, and by early July Iran struck commercial vessels in the Strait, drawing a second night of US retaliatory strikes, with Trump warning the response would “get much worse” if attacks continued, while the IRGC claimed retaliatory strikes on US bases in Bahrain and Kuwait. Washington also reimposed sanctions on Iranian oil exports, unwinding one of the ceasefire’s key incentives.
This cycle of truce-and-relapse confirms that the de-escalation was unlikely to fully unwind the quarter’s dislocations. Supply chains disrupted by the conflict will take longer to normalize than headline commodity prices suggest, and markets now appear to treat geopolitical tail risk and resource nationalism as base-case features of the metals landscape rather than temporary shocks.
Inflation dynamics have also shifted. The conflict itself lifted inflation expectations, and newly appointed Fed Chair Warsh’s June remarks were read as more hawkish than markets had anticipated, a combination that has pushed back rate-cut expectations. Against this backdrop, gold faced its own headwind: ETFs recorded net outflows in Q2, weighing on prices even as the metal’s traditional safe-haven appeal might have suggested otherwise.
Across commodities, the picture is uneven. Copper prices stayed firm, with tight concentrate supply and Antofagasta’s shift toward spot-indexed contracts pointing to margins moving upstream. Zinc concentrate treatment charges turned negative, squeezing Chinese smelters into a coordinated production cut even as refined zinc inventories built. Nickel gave back its entire Q2 rally in June, led by shifting signals on Indonesia’s ore quota policy. Lithium prices stayed elevated despite easing supply disruptions, as robust EV/energy-storage demand and surging Chinese battery exports kept the market tight.
Fig 1 | Commodities prices in 2025 (indexed, price of Feb 27, 2026 = 100)
Source: LME, GFEX, Appian Capital Advisory
Gold
In the first half of 2026, higher inflation expectations and hawkish signals from newly appointed Fed Chair Warsh dampened rate-cut expectations. Gold ETFs saw net outflows of 84t in March and 74t in June, weighing on gold prices. By comparison, gold ETFs recorded net purchases of 788t for 2025. Separately, according to the World Gold Council, central banks were net sellers of 30t in March, recording the lowest monthly reading in two years, before resuming net purchases in April, with net buying recovering to 41t in May.
When tensions in the Middle East escalated, gold prices fell, prompting some market commentators to question whether gold’s safe-haven status had been undermined. Instead, this was in fact a result of its safe-haven function at work, which means that gold prices tend to rise during periods of risk accumulation, yet when a crisis materializes, gold’s high liquidity and store-of-value status often trigger rapid liquidation, which can temporarily weigh on prices.
Fig 2 | Significant gold ETF outflows in March and June 2026
Source: WGC, Appian Capital Advisory
Copper
The copper concentrate market remained tight through Q2, with spot import TC for copper concentrates falling below -$120/t recently. Smelters have relied on by-product revenues from sulfuric acid and precious metals to sustain operations. In H1 2026, China’s refined copper production rose 6.5% YoY (SMM). Recently, Antofagasta, in negotiations for concentrate supply contracts covering H2 2026 and H1 2027, has proposed pricing off the spot market index 2. This is a clear indication that persistent concentrate tightness has been reshaping pricing mechanisms, with industry margins increasingly concentrated upstream.
Although the Middle East conflict has shown signs of easing, sulfuric acid supply is unlikely to recover in the short term, with spot sulphur prices only edging down by about 10% from the peak level. This will continue to constrain SX-EW operations in Africa and Chile.
On inventories, both COMEX and LME stocks remain at multi-year highs. While headline inventory data do not indicate physical tightness, it should be noted that stocks are unevenly distributed across regions, and a considerable portion remains locked in warehouses due to arbitrage strategies. Persistently low concentrate supply growth, a constructive demand outlook and supply chain fragility together underpin copper prices at elevated levels.
Fig 3 | Copper stocks on LME and COMEX reached multi-year high levels
Source: LME, SHFE, COMEX, Appian Capital Advisory
Zinc
In Q2, zinc inventories on both LME and SHFE edged higher, with total stocks at two-year highs. However, the zinc concentrate market continued to tighten, with spot TCs for both imported and domestic concentrates moving into negative territory. Despite by-product credits from sulfuric acid and other metals, a few Chinese smelters are already at loss. In late June, members of the China Zinc Smelters Purchasing Team (CZSPT) reached an agreement to cut production at a joint meeting. With Q3 being a seasonal maintenance period, smelter utilization rates are expected to decline further. China’s refined zinc production rose 4% year-on-year in H1 2026.
Meanwhile, an ongoing structural shift to note is China’s transition from a net importer of refined zinc to near self-sufficiency, and occasionally a net exporter, driven primarily by the sustained SHFE/LME price differential. In the first five months of 2026, China’s net refined zinc imports fell to just 35.6 kt, down sharply from 145 kt in the same period of 2025, while zinc concentrate imports increased 8.8% YoY. The transition reflects that as China’s smelting capacity expands, zinc imports have been increasingly shifting toward concentrate from refined metals.
Fig 4 | Spot zinc concentrate TCs plunged to negative territory
Source: SMM, Appian Capital Advisory
Nickel
Nickel prices rallied 15% in early Q2, but gave back all gains with a 15% decline in June. Amid signals of de-escalation in the Strait of Hormuz in June, sulphur prices peaked off, thereby weakening the cost support for nickel HPAL refining. More importantly, the price drop in June followed declines in Indonesian nickel ore prices, driven primarily by policy swings of Indonesia’s RKAB quota.
Earlier this year, the Indonesian government tightened RKAB quotas, and Weda Bay Nickel 3 has halted ore production because quota being exhausted. Amid tight domestic ore supply, Indonesia imported approximately 6.02Mt of nickel ore from the Philippines in the first five months of 2026, more than double the volume in the same period last year. But policy signals shifted in June, with a few Indonesian mining companies ramping up production and actively applying for “additional” quotas. On June 30, Indonesia’s Ministry of Energy and Mineral Resources (ESDM) stated that the base quota for 2026 remains at 260Mt, with additional quotas to be announced pending approval 4. This suggests that 260Mt is a “floor,” with incremental volumes still undecided. With policy signals swinging back and forth, Indonesian policy uncertainty has become the biggest swing factor in the nickel market.
Fig 5 | Nickel prices plunged in June along with ore costs
Source: Mysteel, Appian Capital Advisory
Lithium
The past quarter saw some positive developments on the lithium supply side, as prior disruptions gradually eased. The resumption of CATL’s lepidolite mine 5, the restart of Australian operations 6,7, and the return of Zimbabwean exports 8 are expected to bring additional supply in H2.
While supply tightness is expected to ease marginally, lithium prices have merely pulled back from their peaks and remain elevated, supported by persistently robust demand and the fact that these supply restarts were broadly in line with market expectations.
Lithium carbonate demand strength has been driven by rising battery capacity per vehicle and fast-growing energy storage installations. According to the China Automotive Battery Innovation Alliance, total power and energy storage battery output in China reached 863 GWh in the first five months of 2026, up 51.9% YoY, of which LFP cells rose 55.8%, accounting for 81.8% of the total.
In addition, China’s export performance in H1 was impressive. Of the total NEV sales in China during the first half of the year, 31% were exports, up sharply from 15% in 1H 2025, with cumulative export volumes more than doubling year-on-year. In the first five months of the year, cumulative exports of power and energy storage batteries reached 145 GW, up 41% year-on-year, accounting for 18.5% of total battery sales.
Fig 6 | China’s EV exports maintained their strong growth momentum
Source: CAAM, Appian Capital Advisory
Outlook
While the Middle East situation may see further twists and turns, we observe that base metals, copper in particular, have become largely immune to Middle East headlines in Q2, which to some extent implies that market has priced in a higher supply risk premium than historically typical. Looking ahead, amid resource nationalism, escalating upstream capex, and higher supply chain risks, an ongoing development in industry is that margins are structurally shifting to the upstream, with both copper and zinc concentrate pricing power continuing to strengthen.
Sources:
1. https://arabcenterdc.org/resource/memorandum-of-understanding-between-the-united-states-of-america-and-the-islamic-republic-of-iran/
2. https://www.mining.com/web/antofagasta-agrees-spot-indexed-copper-ore-sales-with-some-chinese-smelters-smm-says/
3. https://www.mining.com/web/weda-bay-nickel-halts-ore-production-after-mining-quota-runs-out/
4. https://indonesiaminer.com/news/detail/rkab-revision-opens-in-july-as-memr-finalizes-nickel-and-coal-quotas
5. https://www.mining.com/web/catl-secures-safety-permit-to-restart-production-at-flagship-lithium-mine/
6. https://discoveryalert.com.au/core-lithium-finniss-restart-spodumene-funding-2026/
7. https://www.mining.com/minres-reboots-bald-hill-lithium-mine-after-18-month-pause/
8. https://furtherafrica.com/2026/04/14/zimbabwe-lithium-export-ban-lifts-with-strict-rules/
