Copper up 9% since Iran war, near January peak. Will AI boom, shortage propel red metal to new highs?

Copper prices are rising at a pace that is forcing global markets to rethink the future of industrial commodities. What was once a metal tied largely to construction cycles and manufacturing demand is now being reshaped by artificial intelligence, geopolitical tensions, electrification and deep structural supply shortages.

On Thursday, copper prices on the London Metal Exchange climbed more than 1% to $14,153 per metric tonne, inching closer to the record peak of $14,527 touched in January this year. Since tensions escalated around Iran and the Strait of Hormuz, copper prices have already surged 9%, while year-to-date gains are now approaching 15%.

But increasingly, traders believe this is not merely another short-lived commodity spike. Markets are beginning to price in a future where copper becomes one of the most strategically important raw materials of the AI era.

So what exactly is driving this explosive move?

Copper is no longer behaving like a conventional industrial metal. It is rapidly emerging as a strategic commodity sitting at the centre of the next global technological and energy cycle.

The current rally is being fuelled by a rare convergence of geopolitical disruptions, structural supply shortages, AI-led demand growth and years of underinvestment in global mining capacity. Prices are now trading near historic highs as markets begin to factor in not just a temporary shortage, but the possibility of a prolonged structural supply crunch.
One of the lesser-discussed yet crucial triggers behind the rally is the growing shortage of sulfuric acid linked to the Iran conflict and disruptions around the Strait of Hormuz. Sulfuric acid plays a critical role in copper extraction and refining, especially in heap leaching operations.Nearly half of the world’s seaborne sulfur supply originates from the Middle East, and shipping disruptions have significantly tightened global availability. Adding to the pressure, China has imposed restrictions on sulfur and sulfuric acid exports to protect domestic industries, further worsening shortages across global markets.

“The impact is now being felt across major copper-producing nations such as Chile, Peru and Indonesia. Several large mining operations are already grappling with lower output, operational disruptions and rising refining costs,” Ponmudi R, CEO of Enrich Money, said.

He added that delays in the recovery of Indonesia’s Grasberg mine, declining global ore grades, fuel supply challenges in Peru and weaker Chilean production are collectively placing additional strain on an already stretched supply chain.

At the same time, the AI boom is fast turning into one of the biggest long-term copper demand stories the market has seen in decades.

Every AI data centre, semiconductor fabrication facility, hyperscale cloud infrastructure project, electric vehicle ecosystem and renewable energy grid expansion requires enormous amounts of copper. Markets had previously underestimated the scale of copper demand tied to AI infrastructure. Investors are now increasingly viewing copper as one of the foundational metals powering the AI revolution.

What makes the current setup particularly powerful is the inability of supply to respond quickly. Copper mining projects typically take more than 15 years to move from discovery to production. Ore grades continue to decline globally, environmental approvals have become more difficult, and the pace of major new discoveries has slowed considerably.

The International Energy Agency has already warned that copper could face a major structural supply deficit by 2035 if current trends continue.

“Further upping the demand ante is the fact that China remains the largest copper consumer globally. A recovery in infrastructure spending, grid investment, EV manufacturing and industrial activity has tightened the physical market again,” Nirpendra Yadav, Commodity Analyst at Bonanza Portfolio, said.

Will the world run out of copper?

The world may also be heading toward a serious copper shortage as power demand rises sharply, partly due to the rapid proliferation of AI data centres. That warning was highlighted in the government’s Economic Survey 2025-26.

The scale of copper required for green and high-tech infrastructure is staggering.

For instance, a single 1 GW wind turbine requires 2,866 tonnes of copper. At a typical ore yield of 0.6%, that translates into the processing of roughly 477,667 tonnes of ore, enough to fill 1,194 truckloads assuming each truck carries 400 tonnes.

The Economic Survey noted that this estimate only considers copper-bearing ore and excludes waste rock, overburden, rejected material and processing losses. In actual mining operations, the total material moved per GW of wind power could easily exceed 1–2 million tonnes, underlining the immense logistical and environmental intensity involved in copper production.

Where are prices headed?

From a technical perspective, copper has now entered a strong bullish momentum phase after breaking above key resistance levels near $13,000–13,500 per tonne on the LME.

As long as geopolitical tensions remain elevated and sulfuric acid shortages persist, prices are likely to stay structurally firm despite periods of heightened volatility. Immediate resistance is now seen near the historic $14,500 zone, while support has shifted higher toward the $13,200–13,500 range.

That said, after such a sharp rally, near-term corrections and phases of profit booking remain highly likely, as commodity rallies rarely move in a straight line.

Investors should therefore avoid aggressively chasing vertical spikes. Instead, healthy corrections could offer accumulation opportunities in quality copper-related themes, mining companies, industrial metals ETFs and fundamentally strong metal stocks.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)