Aluminum prices on the London Metal Exchange (LME) declined sharply, reaching their lowest levels in nearly three months after the United States granted Iran a 60-day sanctions waiver following preliminary peace talks.

The development strengthened expectations for the resumption of trade flows through the Strait of Hormuz, easing concerns over supply disruptions that had previously supported aluminum prices.

The LME cash aluminum bid price fell to $3,263 per metric ton on June 23, down from $3,403 per ton on June 22, a decline of 4.11%.

The cash offer price also dropped to $3,263.50 per ton from $3,405 per ton, marking a decline of 4.16%.

Benchmark aluminum contracts decline under market pressure

The benchmark three-month aluminum contract also moved lower, with the bid price falling to $3,269 per ton from $3,405 per ton, a decline of 3.99%.

The offer price for the same contract fell to $3,271 per ton from $3,406 per ton, down 3.96%.

Across the futures curve, the December 2027 aluminum contract also weakened, with the bid price declining to $3,115 per ton from $3,180 per ton, while the offer price fell to $3,120 per ton from $3,185 per ton, representing declines of roughly 2.04% in both cases.

The Asian benchmark price for the three-month aluminum contract on the LME stood at $3,232.50 per ton on June 23, reflecting the broader weakness prevailing in the aluminum market.

Exchange inventories decline as canceled warrants fall

Inventory data showed a slight decline in exchange-registered aluminum stocks, with opening inventories on the London Metal Exchange falling to 313,800 tons on June 23 from 315,300 tons on June 22.

The decrease amounted to 1,500 tons, or 0.48%.

Live warrants remained unchanged at 247,575 tons, while canceled warrants declined to 64,150 tons from 66,225 tons, a decrease of 2,075 tons, or 3.13%.

The decline in canceled warrants indicates a reduction in the volume of metal earmarked for withdrawal from LME warehouses.

Meanwhile, the alumina price, according to the S&P Global Platts benchmark, stood at $307.10 per ton.

Bitcoin (BTC) remains under pressure, trading near the $62,700 level on Wednesday after falling 2% the previous day.

Continued selling by institutional investors, alongside outflows from spot Bitcoin exchange-traded funds (ETFs) on Tuesday, continues to weigh on Bitcoin's performance.

Weak activity on the Chicago Mercantile Exchange (CME) is also signaling caution among traders, limiting the prospects for a recovery in the world's largest cryptocurrency.

Federal Reserve

At the same time, expectations for higher US interest rates have increased as Federal Reserve officials adopt a more hawkish tone amid the continued strength of the economy.

Tensions surrounding the framework agreement between the United States and Iran have also boosted demand for safe-haven assets after disagreements emerged between the two sides over several key issues.

According to the CME FedWatch Tool, markets are currently pricing in a 36% probability of a Federal Reserve rate hike at the July meeting, compared with 9% a week ago.

For the September meeting, the probability of a rate hike has risen to more than 70%, up from 29% previously.

Institutional money continues to leave Bitcoin funds

Institutional demand continued to weaken this week, with data from SoSoValue showing that spot Bitcoin ETFs recorded net outflows of $113.78 million on Tuesday, following outflows of $68.18 million on Monday.

If these outflows continue or accelerate in the coming days, Bitcoin could face a deeper price correction.

Derivatives traders remain on the sidelines

A report released by K33 Research on Tuesday indicated that CME data continues to reflect subdued and cautious activity, with no major changes from the trends that have prevailed throughout the year.

The annualized Bitcoin futures basis rose slightly to 5%, but remains at relatively low levels, while open interest declined by 4,730 BTC over the past week to 101,655 BTC.

This puts the CME on track to record its lowest level of open interest since October 2023 following the expiration of June contracts later this week.

At the same time, funding rates increased over the weekend and briefly reached an annualized 5%, their highest level since June 4, signaling a limited return of speculative long positions.

A K33 Research analyst said: "Positioning levels and overall activity remain weak, with no meaningful shift from the quiet market conditions that have characterized most of the year."

The analyst added that the absence of institutional momentum and strong derivatives activity continues to limit Bitcoin's recovery prospects in the near term.

Brent crude prices fell more than 1% on Wednesday to their lowest level in nearly four months, extending losses as signs emerged that more oil tankers are preparing to leave the Strait of Hormuz.

Brent crude futures declined by $1.20, or 1.56%, to $75.88 per barrel by 10:01 GMT, while US West Texas Intermediate crude fell by $1.14, or 1.6%, to $72.07 per barrel.

Brent touched a low of $75.37 per barrel, its weakest level since February 27, one day before the US-Israeli strikes on Iran began. WTI also fell to $71.55 per barrel, its lowest level since March 3.

Expectations of Iranian oil returning weigh on prices

Tim Waterer, Chief Market Analyst at KCM Trade, said: “There are early encouraging signs of increased tanker activity, but the market is pricing in the broader scenario of Iranian oil returning to the global market and the Strait of Hormuz returning to normal operations.”

He added that sanctions relief could allow Iranian production and exports to increase relatively quickly, given the large volumes of oil already stored aboard tankers, noting that the process could take “weeks rather than months.”

Signs of market weakness intensified as physical crude cargoes were sold at discounts across various regions, reshaping trade flows as markets came under pressure from a rapid increase in Middle Eastern supply, with Iran preparing to boost sales following temporary US sanctions relief.

Strait of Hormuz returns to focus amid efforts to ease shipping

Oman announced that it will keep the Strait of Hormuz open to shipping traffic without imposing transit fees, while also designating temporary northern and southern routes alongside the existing shipping channel to facilitate the safe passage of vessels departing the region.

Prices also came under additional pressure this week following the 60-day sanctions waiver granted by Washington to Tehran after the initial peace talks, allowing Iran to sell oil, alongside a reduction in hostilities in Lebanon.

Vessel-tracking data showed that three stranded supertankers successfully passed through the strait on Tuesday, while the United Nations shipping agency said an evacuation plan is being implemented to allow hundreds of stranded vessels to transit the waterway following the ceasefire agreement between the United States and Iran.

Uncertainty remains over the nuclear agreement and future exports

Despite that, uncertainty continues to surround the durability of the agreement. US President Donald Trump said on Tuesday that Iran had agreed to nuclear inspections “indefinitely,” while Tehran insisted it had made no such commitment.

Mark Malek, Chief Investment Officer at Siebert Financial, said: “Markets are currently placing excessive confidence in a positive outcome without fully pricing in the risks associated with unresolved nuclear issues and disagreements over inspection procedures.”

Investors are also closely monitoring how quickly Middle Eastern producers can restore exports and whether larger numbers of vessels will return to the region in the coming weeks.

Looking ahead, Macquarie expects Brent crude to average $77.09 per barrel in 2026 before falling to $64 per barrel in 2027.

The US dollar extended its gains on Wednesday to reach its highest level in 13 months against a basket of major currencies, as investors moved into safe-haven assets amid a selloff in technology stocks and prepared for the possibility of further interest rate hikes by the Federal Reserve.

Volatility persisted in equity markets following a broad selloff across the technology and semiconductor sectors, boosting demand for both the US dollar and government bonds as safe-haven assets.

At the same time, expectations for higher US interest rates continued to rise as Federal Reserve officials adopted a more hawkish tone amid ongoing strength in the US economy.

Tensions surrounding the framework agreement between the United States and Iran also supported demand for safe-haven assets after disagreements emerged between the two sides over several key issues.

The US Dollar Index, which measures the performance of the greenback against a basket of major currencies, rose to 101.69 points, its highest level since May 2025, before stabilizing with gains of 0.2% during trading.

Dollar remains the preferred safe haven

Ray Attrill, Head of FX Strategy at National Australia Bank, said that "the US dollar remains the preferred safe-haven currency."

He added that current momentum continues to favor the greenback, although "much of these moves has already been priced into the market."

According to the CME FedWatch Tool, markets are currently pricing in a 36% probability of a Federal Reserve rate hike at the July meeting, compared with just 9% a week ago.

For the September meeting, the probability of a rate hike has climbed to more than 70%, up from 29% previously.

The euro fell 0.3% to $1.1340, its lowest level in more than a year, as dollar strength continued to dominate currency markets.

Lee Hardman, Senior Currency Analyst at MUFG, said the decline in EUR/USD reflected "the recent divergence in market expectations for European Central Bank and Federal Reserve policy."

He explained that US interest rate markets have started pricing in several potential rate hikes by the Federal Reserve, while eurozone markets have become less convinced about the need for further tightening by the European Central Bank.

Yen weakness persists amid intervention pressure

Sterling edged lower against the dollar to $1.319 after Bank of England Monetary Policy Committee member Alan Taylor said that "keeping interest rates unchanged for an extended period" is the appropriate response to inflationary pressures.

The Australian dollar, which is highly sensitive to risk sentiment, also fell 0.3% to $0.689, its lowest level since early April, as mixed inflation data increased uncertainty about future rate hikes.

Meanwhile, the Japanese yen remained under pressure, trading at ¥161.69 per dollar and struggling to regain strength as the US currency continued to advance.

A move above ¥161.96 would push the yen to its weakest level since 1986.

Repeated verbal warnings from Japanese officials this week have failed to ease pressure on the currency, while the Japanese government has begun preparing plans to manage its $1.3 trillion in foreign exchange reserves more effectively in order to support potential intervention efforts.

Former Bank of Japan board member Sayuri Shirai said the yen could weaken to ¥165 per dollar if the Federal Reserve raises interest rates this year.

At the same time, the summary of opinions from the Bank of Japan's June policy meeting showed that some members called for additional rate hikes to move the central bank's policy rate toward levels considered more neutral for the economy.