Copper prices have proved surprisingly resilient in the face of the Middle East conflict, but UBS warns the metal has only just begun to price in the risk of weaker global demand.
A full-blown recession could push prices sharply lower, the Swiss bank said.
Copper on the London Metal Exchange (LME) briefly dipped below $12,000 per metric ton before steadying, a relatively modest decline given the surge in energy prices triggered by the closure of the Strait of Hormuz.
UBS remains positive on copper over the longer term, forecasting prices rising to $13,500 by mid-year and $15,000 by early 2027, underpinned by a projected supply deficit of 520,000 metric tons in 2026.
However, analysts at the bank cautioned that historically copper prices have fallen 20-50% during recessions, and that current prices remain elevated relative to what a serious global downturn would imply.
UBS's base case assumes oil flows through the Strait of Hormuz resume within two to four weeks, allowing markets to return to a more positive footing.
In the near term, the bank is hedging its constructive view cautiously, preferring to build positions gradually rather than commit fully while Middle East uncertainty persists.