UBS: Middle East Conflict — Binary Outlook for Industrial Metals
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UBS outlines a binary outlook for industrial metals and mining stocks stemming from the Middle East conflict. In a de-escalation scenario—assuming an early April ceasefire and reopening of the Strait of Hormuz—copper and copper mining equities should rebound, while aluminum and coal consolidate or decline. Conversely, a prolonged conflict exceeding two months would trigger an energy price shock, pushing copper and copper miners lower while lifting aluminum and coal prices.
Copper demand growth for 2026 is revised down to 2% (with China at 1.2%), but grid spending and energy transition requirements maintain resilience. The market remains in a small deficit for 2026. Recent weakness in copper mining equities is viewed as a buying opportunity, with Freeport-McMoRan, First Quantum, Anglo American, and Teck Resources favored.
Aluminum faces direct supply risks, with the Middle East accounting for 9% of global and 23% of ex-China supply. Roughly 575,000 tonnes of smelting capacity has already been curtailed. Gold has seen positioning clean up following a recent pullback, though upside momentum may fade. De-dollarization and US diversification themes remain supportive above $4,000 per ounce.
UBS raised targets by over 15% for KGHM, Lundin Mining, and Boliden. Preferred names include Newmont, Endeavour Mining, SSR Mining, and Skeena Resources among gold miners, upgraded Wheaton Precious Metals to Buy, and maintains Franco-Nevada at Buy. Core Natural Resources is the preferred pure-play coal stock.