The underlying signal remains constructive for industrial commodities as demand for electrification continues, despite an uneven de-escalation of the conflict in the Middle East, Jefferies said in a note on Monday.

Electrification-driven demand, particularly from data centers and power infrastructure, continues to build, supporting a structurally bullish medium-term outlook for metals like copper, aluminum, lithium, nickel, and cobalt. Thermal coal is stabilizing, and LME aluminum declined 14% from its crisis peak with the gradual easing of tensions in the Middle East.

However, near term, the sector is facing headwinds from a more hawkish tone from the US Federal Reserve and a stronger US dollar. Copper's demand growth is increasingly constrained by a lack of new mine supply following years of underinvestment. Iron ore faces a more muted outlook as China's steel output plateaus, and Simandou supply ramps up through the year.

The investment firm assigned Rio Tinto Group (ASX:RIO) a hold rating with a price target of AU$187 per share, South32 (ASX:S32) a buy rating and a price target of AU$6 per share, and Northern Star Resources (ASX:NST) a buy rating with a price target of AU$27.50 per share.