After hitting an all-time high earlier this year, copper prices on the London Metal Exchange have been sliding as the West Asia conflict weighs on the metal’s demand outlook.From $14,527.50 per tonne in late January, the price of three-month copper futures contract had cooled to $13,343.5 per tonne on February 27, just before the US and Israel attacked Iran. Since then, the three-month futures contract has fallen sharply to around $12,147 on the London Metal Exchange.Copper is essential to the modern economy, with uses ranging from housing and manufacturing to power grids, clean energy, artificial intelligence and defence. Thus, it is often seen as a barometer of economic health. A rise in copper prices is considered a signal of robust economic growth, while falling prices tend to raise concerns about an economic slowdown.According to industry sources and experts, the sharp fall in prices of the red-metal reflects weakening demand prospects amid concerns that higher energy costs from the West Asia conflict could dampen economic growth.West Asia conflict impactSatnam Singh, Director at Crisil Intelligence, said since copper prices often move in conjunction with the global economy, high energy prices spurred by conflict in West Asia are triggering fears of weak economic growth.“At the same time warehouse stocks are growing after a period of tightness, meaning copper is more readily available. Global inventories have surpassed 1 million mt for first time since 2003,” he told The Indian Express.Also Read | Petrol, diesel excise duty slashed by Rs 10: How it impacts consumers, explainedAccording to Singh, the near-term future of copper remain foggy. “Sulfuric acid bottleneck in the Strait of Hormuz could push down copper output, creating shortages and driving prices back up. But high energy prices could weaken the global economy, shrinking demand and driving down the price,” he added.Story continues below this adTanima Pal, Research Associate at Centre for Social and Economic Progress, also highlighted that supply chain disruptions, particularly in the transit of critical inputs such as sulphuric acid through the Strait of Hormuz, pose risks to cathode production, contributing to price volatility.“While the current price plummet largely reflects immediate geopolitical influxes, the underlying demand-supply imbalance is likely to persist until more mines become operational or more recycled copper feeds back into the system,” she said.She maintained copper prices remain highly sensitive to current global headwinds, given the metal’s widespread use across both conventional and renewable energy sectors.“This red-metal’s price behaves according to the fundamental demand-supply economics. On the supply side, inventories on the London Metal Exchange (LME) have surged to record highs, given that the global copper processing capacity outpaced the global mining capacity. Concurrently, the demand-side (mostly industrial demand) remains subdued due to rising energy costs stemming from ongoing West Asia conflicts, US tariff uncertainty,” Pal told The Indian Express.Story continues below this adMeanwhile, industry insiders noted that regional demand dynamics are also contributing to the softening trend. Demand in Gulf Cooperation Council (GCC) countries — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE — has weakened amid the ongoing conflict.“GCC countries account for around 0.8 million tonnes of copper fabrication. They may have temporarily scaled back production plans, which would reduce their requirement for raw materials. This, in turn, makes additional supply available to other regions globally, exerting downward pressure on copper prices,” an industry source said.Record rally last yearUntil the recent decline, copper had staged a breakneck rally, hitting a record high of $14,527.50 per tonne in late January. In 2025, prices surged well beyond market expectations, rising over 35% through December — the sharpest annual gain since 2009.Also in Explained | A perfect storm: Why gold prices are down after 2025’s historic surgeThe rally was driven by a combination of factors, including global trade disruptions triggered by tariffs imposed by US President Donald Trump, supply tightness due to disruptions at major copper mines worldwide, and a weakening dollar.Story continues below this adIn August, President Trump imposed a 50% tariff on semi-finished and derivative copper imports, prompting US buyers to stockpile the metal ahead of the tariff’s implementation on August 1.The possibility that refined copper — thus far exempt from these duties — could potentially be subject to these tariffs has been a key driver of the copper price rise in 2025. US buyers have aggressively purchased and stockpiled copper reserves in warehouses, steadily building up their inventories, to avoid facing potentially higher costs.On the supply side, a series of accidents in major mines in Indonesia, Chile, and the Democratic Republic of Congo (DRC) has curtailed global output.In September, a mudslide struck Indonesia’s Grasberg mine, the world’s second-largest copper mine, forcing the operator to declare force majeure. The mine remains shut and is unlikely to return to full production before 2027. In July, a major rock blast brought operations to a halt at a copper mine in Chile, while seismic activity triggered severe underground flooding at one of the world’s most important copper mines in the DRC this May.Story continues below this adTogether, these disruptions have significantly squeezed global copper supply at a time when demand is rising sharply, driven in part by the rapid expansion of artificial intelligence and the resulting proliferation of data centres worldwide.Apart from supply constraints, a weakening US dollar also added upward pressure on copper prices in 2025.