The copper “supercycle” narrative has a blind spot, and it’s shaped like a geopolitical tinderbox. For the better part of two years, the mining industry has operated under a single, dominant assumption: the world is running out of copper just as the energy transition kicks into high gear. It’s a compelling story of structural deficits, falling ore grades, and a relentless march toward electrification.
But a new report from Bloomberg Intelligence (BI) just threw a bucket of cold water on that thesis.
The consensus view assumes a stable macro environment. It doesn’t account for the “Copper Bear” scenario: a prolonged conflict involving Iran that sends oil prices screaming past $150 per barrel. In this reality, the copper deficit doesn’t just shrink: it evaporates. We aren’t looking at a shortage; we’re looking at a surplus driven by global demand destruction.
This isn’t just a theoretical exercise for economists. For major producers like First Quantum Minerals and Antofagasta, it represents a potential earnings collapse of up to 55%.
The $150 Oil Trap: Why Demand Destruction Wins
The logic is simple, even if the consequences are “nasty.” Copper is often called “Doctor Copper” because of its ability to pulse-check the global economy. When energy prices spike and stay elevated, the global economy gets a fever.
According to the BI analysis, prolonged hostilities in the Middle East would likely push Brent crude above the $150 mark. At that level, the inflationary pressure acts as a throttle on global growth. High energy costs act as a regressive tax on every sector, from manufacturing to consumer electronics. When oil sits at $150, people aren’t buying new EVs, and governments aren’t fast-tracking massive grid upgrades. They’re too busy trying to keep the lights on.
This is the “other side” of the copper story. While the supply side of the equation might face some disruptions, the demand side gets hammered harder. BI suggests this environment would push the copper market into a surplus. It’s a classic buyer’s market born from a global slowdown.
The Earnings Squeeze: A 55% Hit for First Quantum
When energy costs rise while the price of your primary product falls, the margin compression is brutal. Mining is an energy-intensive business. From the diesel that powers massive haul trucks to the electricity required for electrolytic refining, there is no hiding from an oil spike.
First Quantum Minerals is particularly vulnerable in this bear case. BI estimates that a prolonged conflict and the resulting macro fallout could cut First Quantum’s earnings by as much as 55%.
That’s not a rounding error. That’s a crisis.
First Quantum is already navigating a complex operational landscape, and a halving of projected earnings would severely limit its ability to de-lever or reinvest in growth. Similarly, Antofagasta: a bellwether for the Chilean copper sector: faces a projected 32% hit to earnings.
The strategic calculus here isn’t subtle: if you are a high-cost producer or heavily leveraged to the current spot price, the Copper Bear scenario is a direct threat to your balance sheet. For context on how regional risks can shift project viability, one only needs to look at the $2.5b reversal how Chilean courts are reshaping project de-risking at Dominga.
Production Cost Inflation: The Dual Squeeze
It isn’t just about the top line. The bear scenario creates a dual squeeze by inflating the cost of every single input.
Research into recent conflict zones shows that maritime insurance premiums for Middle Eastern shipping routes can surge by 300% almost overnight. Alternative shipping routes add 20–30% to logistics costs while extending transit times by two weeks. For a global commodity like copper, these “frictional” costs add up.
- Natural Gas: Facing premiums of 35–55% above baseline, hammering smelter operations.
- Industrial Electricity: Expected to rise 20–40% for refining.
- Heavy Fuel Oil: Up 40–65% for remote site power generation.
Mining companies are essentially being forced to pay more to produce a metal that the world, suddenly, wants less of. This is the definition of stagflation in the commodities space.
The Yield Spike: Copper’s Biggest Headwind
While the geopolitics capture the headlines, the bond market provides the real-time autopsy of copper’s price action.
Copper is a non-yielding industrial metal. When geopolitical risk flares, capital doesn’t flee to copper; it flees to the safety of US Treasuries and the US Dollar. Following the onset of regional conflict, the 10-year Treasury yield often spikes: recently seen hitting 4.10% in a 48-hour window. This moves real yields significantly higher.
A higher yield environment reduces the net present value of the very infrastructure projects: like EV charging networks and massive grid buildouts: that are supposed to drive copper demand. Simultaneously, a strengthening US Dollar (DXY) makes copper more expensive for international buyers in Europe and Asia.
Those two clocks do not sync. You have a rising cost of capital making projects more expensive at the same time that the physical metal becomes more expensive for the end-user. The result is a stalled transition.
Supply Tightness vs. Demand Destruction
Paradoxically, supply is tight. We’ve seen it with the delays at Denison Mines’ Phoenix project and the ongoing permitting hurdles for Freeport’s $7.5B expansion in Chile.
However, Goldman Sachs forecasts an average of just $11,400/ton for 2026 in a bear case scenario: a figure that would have seemed bullish two years ago but feels grim today given the inflated cost of production. If copper breaches the $12,000 psychological floor amid a speculative unwinding of “long” positions, the margin compression for mid-tier miners will be terminal.
The Long-Term Structural Shift
If this conflict persists, the mining industry won’t just sit and wait for oil to drop. We are already seeing an acceleration of “de-risking” strategies. Companies are embedding permanently higher operational costs into their production economics by investing in alternative energy infrastructure and diversified supply chains to reduce Middle Eastern exposure.
While these moves are necessary for long-term survival, they represent a massive capital drain in the short term. It raises the “floor” for copper prices in the future, but it does nothing to alleviate the earnings pain of today.
The mining industry has a history of being blindsided by macro shifts while focusing on the geology. But as we look toward the 2026 investor outlook, the risk isn’t just about what’s in the ground. It’s about the energy used to pull it out and the economic health of the person buying it.
A Buyer’s Market in an Inflationary World
There is a certain irony in the current situation. The world knows it needs copper for the “green revolution,” yet the very geopolitical instability that drives up energy prices may prevent that revolution from being affordable.
We are entering a period where the “scarcity” narrative is being challenged by the “affordability” reality. If oil stays above $150, the demand destruction will be swift and significant. The surplus that Bloomberg Intelligence warns of isn’t a sign of plenty; it’s a sign of a global economy that has hit its limit.
For investors and operators, the takeaway is clear: the copper bull case is not inevitable. It is contingent on a world that can afford to grow. If the Iran conflict remains a prolonged feature of the 2026 landscape, the “Copper Bear” will be more than just a scenario: it will be the bottom line.
For more deep dives into commodity trends and historical analysis, catch up on our recent issues:
- Skillings Mining Review January 2025
- Skillings Mining Review March 2025
- Skillings Mining Review May 2025
The clock is already ticking on these earnings reports. Whether the industry is ready for the shift is another question entirely. There’s not enough margin to go around if oil stays at these levels. Welcome to the new reality.
