(Yicai) March 9 -- Prolonged tensions in the Middle East could lead to market institutions reassessing the valuations of assets such as copper and silver, analysts told Yicai at a recent seminar, as Israel launches a new round of strikes on Iranian military infrastructure.

Copper, which has been performing strongly lately, might actually be one of the more vulnerable assets right now, said Roukaya Ibrahim, chief commodities strategist at Canadian investment consulting firm BCA Research. Investors should watch out for a potential valuation bubble in the short term.

If the conflict drags on, copper prices could be exposed to downside risks, Ibrahim said. Copper prices have performed well over the past few months, but this has primarily been driven by speculative demand in Asia, physical asset trading and overly optimistic expectations that copper could become the next gold, she said. This means that if global economic growth turns out weaker than expected, copper prices, which lack strong fundamental support, could experience a pullback.

Different commodities have different outlooks, she said. In an environment where fragile energy supply chains are weighing on economic growth, major commodities such as oil, natural gas and aluminum actually have room to rise.

In terms of precious metals, Ibrahim said she favored gold over silver. This is because silver has a strong industrial component and is therefore more vulnerable if economic growth slows, while gold benefits more directly from investors looking for safe-haven assets.

Japanese stocks could also be at risk, said Matt Gertken, chief geopolitical strategist at Montreal-based BCA Research. Japan’s stock market has recently gone through a strong rally, helped by a weaker currency, a more dynamic domestic economy and supportive political policies. However, because Japan relies heavily on imported energy, its stock market could face significant losses if the external shocks continue, he said.

Editor: Kim Taylor