Adds analyst comment and dateline, updates prices

By Eric Onstad

LONDON, June 18 (Reuters) - Copper prices lost traction on Thursday, as the dollar strengthened following a hawkish U.S. central bank meeting and due to wariness about the U.S.-Iran peace deal.

Benchmark three-month copper on the London Metal Exchange CMCU3 was down 1% at $13,682 a metric ton at 0930 GMT, after it ended with a 0.3% gain in the previous session.

The dollar index =USD hovered close to two-month highs as traders bet on possible rate hikes after new Federal Reserve chair, Kevin Warsh, highlighted inflation concerns. FRX/

Markets are currently pricing in a 50% chance of a 25-basis-point rate hike in September, according to CME Group's FedWatch tool, higher than 27% priced in on Wednesday.

A stronger dollar makes greenback-priced commodities more expensive for buyers using other currencies.

"His (Warsh) emphasis on vigilance against price pressures seems to have unwound the optimism that had briefly lifted the complex following progress on the U.S.-Iran peace agreement," said Neil Welsh, head of metals at Britannia Global Markets.

The yield on the 2-year bond, which is most sensitive to the market's expectations for rate action, rose to its highest since February 2025.

"Should U.S. bond markets remain unsettled, we could see further downside pressure on metals by virtue of a stronger dollar and rising rates," said analyst Ed Meir at broker Marex.

LME copper touched a one-week high on Monday after U.S. and Iranian officials agreed a framework to end the war.

The two nations released the text of the agreement on Wednesday, but U.S. President Donald Trump threatened to resume attacks if Iran failed to honour its commitments.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 dropped 0.5% to 104,780 yuan ($15,497) a ton, ending a week shortened by China's Dragon Boat Festival holiday from June 19 to 21.

Among other metals, LME aluminium CMAL3 slipped 0.2% to $3,404 a ton, zinc CMZN3 was little changed at $3,587, lead CMPB3 fell 0.4% to $1,971.50, nickel CMNI3 shed 0.8% to $17,920 and tin CMSN3 dropped 2.1% to $54,180.

($1 = 6.7615 Chinese yuan renminbi)