METALS-Aluminium slides 8% and copper slumps as speculators run for cover on Iran war fallout

(Updates prices at 1530 GMT)

By Eric Onstad

LONDON, March 19 (Reuters) - Aluminium prices tumbled as much as 8% on Thursday as speculators scrambled to liquidate bullish positions while copper sank to a three-month low on worries that surging oil prices will hit global growth at the same time the market is swamped with plentiful inventories.

Benchmark three-month aluminium on the London Metal Exchange tumbled 8.4% before paring losses to 4.5% at $3,245 a metric ton by 1530 GMT.

Prices of the lightweight metal, used in transport, construction and packaging, had climbed in recent weeks due to worries about supply following the outbreak of war in the Middle East, a major producer.

Speculators who were betting on further price gains have had to liquidate their positions as fears about the impact of the war on the global economy swept through global financial markets.

Options hedging activity contributed to the sharp fall in aluminium, with a drop through the $3,300 level triggering big volumes, said Alastair Munro, senior base metals strategist at broker Marex.

"The market was long and has been seeing that length reduce. The world is in a clear-the-decks moment - cut risk," Munro added.

LME copper slid as much as 5.2% to $11,754 a ton, its lowest since December 19, before trimming losses to 2%.

"What higher oil prices do is curb demand across the economy, and if you curb demand that just means less metal being used," said Carsten Menke, analyst at Julius Baer in Zurich.

Benchmark Brent oil prices jumped to their highest in more than a week to over $119 a barrel after Iran attacked energy facilities across the Middle East following Israel's strike on its South Pars gas field, a major escalation that sparked a slump in equity markets.

The most-active copper contract on the Shanghai Futures Exchange declined as much as 5.1% in daytime trading to 93,850 yuan, its lowest since December 19.

Traders also warily eyed the growing pile of copper building up in exchange-certified warehouses, with LME inventories having shot up 135% so far this year to the highest since August 2019.

Among other metals, LME zinc lost 1.6% to $3,084 a ton, lead gave up 1.4% to $1,887, nickel fell 1.1% to $16,970 and tin slid 3.4% to $43,545.

Lead hit an 11-month low, zinc touched its weakest in three months while tin dropped to its lowest since January 5.

($1 = 6.8996 Chinese yuan) (Reporting by Eric Onstad; Editing by Krishna Chandra Eluri and Leroy Leo)