Adds analyst quote, updates prices

By Solomon Cefai

SINGAPORE, July 9 (Reuters) - Copper rebounded on Thursday, as the market looked past an escalation in Gulf hostilities and the dollar steadied after its recent surge.

Benchmark three-month copper CMCU3 on the London Metal Exchange was up 1.62% at $13,379 a metric ton by 0700 GMT.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 added 0.16% to 103,160 yuan ($15,182.65) a ton, paring losses from a drop of as much as 1.32% earlier in the session.

Though the copper market still watches Middle East conflict developments, investors "have tended to price in an expectation that any escalations will be short-lived and a resolution will be found," said Craig Lang, principal analyst at CRU.

Copper fell on Wednesday on demand concerns after U.S. President Donald Trump said the memorandum of understanding signed with Iran to end the Gulf conflict was "over" and the two countries traded attacks.

"The resurgence of the Middle East conflict has led to short-term trading based on inflation and interest rate logic," Chinese broker Everbright Futures said in a note.

Inflation and interest rates remain front of mind for industrial metals. Higher input costs, including from energy, have squeezed manufacturers, casting a shadow over industrial metal prospects. Chinese producer inflation neared a four-year high in June, data released on Thursday showed.

Elsewhere, aluminium was firm. Its price on the LME CMAL3 was up 0.62%, while on the SHFE SAFcv1 the metal edged down 0.04%.

Aluminium has been supported by waning inventories and concerns about a disruption to the return of supply from the Middle East.

Among other LME metals, zinc CMZN3 rose 1.85%, lead CMPB3 gained 0.61%, nickel CMNI3 gained 1.21% and tin CMSN3 rose 2.57%.

Elsewhere on SHFE, down only 0.04%, zinc SZNcv1 added 0.4%, lead SPBcv1 added 0.47%, nickel SNIcv1 gained 1.22% and tin SSNcv1 gained 0.99%.

($1 = 6.7946 Chinese yuan renminbi)