What the Middle East truce means for miners?

Investing.com -- Copper and gold equities offer the most attractive opportunities among mining stocks following the ceasefire deal between the U.S. and Iran, UBS analysts say, based on the assumption that the truce holds and energy prices normalize.

UBS had previously described the outlook for miners as "binary" depending on how the conflict resolved. With a ceasefire now announced, the bank believes the biggest risk to the sector — an energy price shock that could trigger a prolonged period of weak industrial metals demand — is likely to be avoided if flows through the Strait of Hormuz return to normal.

"We believe Copper equities offer the most attractive risk vs reward if de-escalation and energy price normalisation persists, followed by gold equities," analysts led by Daniel Major said in a note. 

Copper equities have fallen around 20% since the conflict began. Analysts at UBS see the pullback as a buying opportunity, saying that the positive fundamental case for the metal is "unchanged, arguably more compelling."

A production downgrade of roughly 100,000 tonnes per year at Ivanhoe’s Kamoa-Kakula mine for 2026-27 has added to supply concerns, and analysts note that energy price volatility is likely to reinforce investment in renewables, grids and reshoring, all of which support copper demand.

Among individual names, UBS highlights First Quantum, Freeport-McMoRan, Anglo American and Teck as its preferred stock plays.

Gold equities have also dropped around 20% since the conflict began. Likewise, UBS sees the reversal as an opportunity in selected names, the analysts warn that the powerful earnings upgrade cycle that has driven gold miners over the past two years "is unlikely to continue and may reverse."

With gold prices in the $4,000s per ounce and major producers’ all-in sustaining costs below $2,000 per ounce, the team views cash margins as still attractive and valuations broadly undemanding. Newmont, Endeavour, SSR Mining and Skeena are the preferred picks, alongside streamers Wheaton Precious Metals and Franco-Nevada.

Aluminium presents a more complicated picture. LME prices are up around 10% since the start of the conflict, outperforming copper by 15 percentage points, driven partly by damage to smelter capacity in the Middle East.

UBS expects some of that outperformance to reverse if the Strait reopens, but believes supply losses — including disruptions to facilities operated by EGA and Alba — will more than offset any demand weakness this year, keeping aluminium prices supported.

Alcoa and Norsk Hydro, both up around 20% since the conflict began, are expected to give back some gains but benefit from a higher-for-longer price environment.