Goldman Sachs warns: The risk of a sharp decline in copper prices is increasing, and a Strait blockade could become the "last straw"!

Ask AI · Why Goldman Sachs and UBS Disagree on Their Copper Price Forecasts?

Source: Jintou Data

As the situation in the Middle East continues to remain volatile, Goldman Sachs has recently issued a warning: if the Strait of Hormuz—this critical chokepoint for global shipping—remains effectively blocked, the price of “Copper Doctor” could face further sharp declines.

At present, the metals market is in extreme unease. U.S. President Donald Trump has delivered a final ultimatum to Iran, demanding that it reach an agreement within a set deadline, or else Iran’s civilian infrastructure will be subjected to large-scale attacks. As a result, over the past month, soaring oil and gas prices have begun to squeeze room for global economic growth, and benchmark base metals are broadly under pressure.

In a report led by analysts from Goldman Sachs, including Aurelia Waltham, they said: “We believe that in the short term, copper price risk is clearly tilted to the downside. If the disruption to shipping through the Strait of Hormuz lasts longer than expected, it will keep energy prices elevated for the long term, thereby dragging down global growth.”

Although Goldman’s baseline forecast suggests that shipping through the strait could gradually resume starting in mid-April, the analysts emphasized that current copper prices have already clearly diverged from the fundamentals. According to Goldman’s calculations, copper’s “fair value” should be around $11,100 per metric ton, while the current trading price is far above that level. Since the U.S. and Israel launched attacks on Iran, copper prices have fallen by about 7% in total.

Even though supply tightness in markets outside the U.S. and the need for countries to replenish strategic stockpiles provide some support to copper prices, Goldman warned that once the global economy enters its predefined “severely unfavorable” scenario, these supporting factors will become insignificant.

“Right now, copper prices lack fundamental support. If the economic outlook deteriorates further and investors start selling risk assets, copper prices are likely to trigger another round of declines,” Goldman said plainly in the report. Based on this, Goldman has lowered its average copper target price for this year from the prior $12,850 per metric ton to $12,650.

But UBS says it remains optimistic about the copper price’s medium-term outlook: “As the marginal improvement in geopolitical stability continues and countries further ramp up investment in grid upgrades and electrification, the logic behind the structural growth in demand for copper and aluminum has not wavered.”

As of this morning, on the London Metal Exchange (LME), three-month copper futures are up slightly by 0.3% to $12,400 per metric ton. Market sentiment remains fragile, as investors are closely watching the latest developments in Trump’s policy toward Tehran.