Metals and mining stocks could see significant gains as geopolitical tensions escalate following conflict with Iran, according to investment analysts. Jefferies analysts highlighted on Monday that commodities beyond oil are positioned to spike in price, with specific metals and mining sector stocks emerging as top investment opportunities during this period of heightened uncertainty.
The investment bank reiterated bullish positions on several major mining companies, identifying Freeport McMoRan, Glencore, and Anglo American as its top stock picks in the metals and mining sector. Additionally, analysts noted that Alcoa could become a preferred investment depending on the duration of the conflict.
Geopolitical Risks Drive Metals and Mining Sector Gains
According to Jefferies, strength in metals and mining share prices over the past six months can be attributed to elevated geopolitical risks, a structurally weakening dollar, and inflation concerns. The current conflict introduces three key impacts that should lift the sector broadly: rising costs due to climbing energy prices, supply chain risks, and an intensified need for strategic stockpiling.
The analysts emphasized that these factors create a favorable environment for metals and mining investments. However, the extent of the gains will likely depend on how long the geopolitical tensions persist and whether supply disruptions materialize.
Aluminum Supply Disruptions Present Major Bullish Risk
Aluminum has emerged as a particular commodity of concern as the Middle East has become a major producer since the mid-2000s. According to Jefferies research, roughly 9% of global aluminum production comes from Gulf states, which rely on the Strait of Hormuz for shipments.
The closure of the Strait of Hormuz or any major supply chain disruptions would directly impact the aluminum market, creating upward pressure on prices. JPMorgan commodities analysts characterized aluminum supply disruptions as a “major bullish risk” for the metal.
Meanwhile, Iran alone accounts for around 3% of global iron ore production, according to Jefferies. Stockpiling efforts could also prove bullish for copper, which recently saw an uptick alongside precious metals gold and silver in the latter half of 2024.
Safe Haven Demand Supports Gold Prices
The price of gold jumped as the new geopolitical conflict reiterated one of the metal’s strongest bull cases, which has helped it soar to record levels over the past year. JPMorgan analysts indicated that gold futures positioning suggests a potential 5% to 10% upside in prices in the near term.
However, both investment banks acknowledged certain limiting factors. Jefferies noted that a stronger dollar resulting from the war could keep a lid on prices, as the dollar and commodities tend to be inversely correlated.
In contrast, Jefferies analysts believe the geopolitical and inflation factors matter more than the stronger dollar for now, and commodity prices should rise as a result. JPMorgan cautioned that “conflict-driven risk premiums in gold can be sharp but hard to sustain,” suggesting potential volatility ahead.
The trajectory of metals and mining sector performance will likely depend on the evolution of the conflict and whether anticipated supply disruptions materialize. Authorities have not confirmed specific timelines for resolution, leaving market participants to monitor developments closely in the coming weeks.
