METALS-Copper falls as renewed US-Iran tensions dent peace hopes

May 8 (Reuters) - Copper prices fell on Friday, pressured by a stronger dollar and renewed U.S.–Iran tensions that have dimmed optimism over a potential peace deal.

Benchmark three-month copper CMCU3 on the London Metal Exchange fell 0.3% to $13,354 per metric ton by 0332 GMT. However, it was on track for a weekly gain of 3.8%.

The most-traded copper contract on the Shanghai Futures Exchange SCFcv1 was down 0.2% at 102,790 yuan ($15,104.96) per ton, but was on course for a weekly gain of about 2%.

"It is due to the fact that the skirmish that kind of resurfaced between the U.S. and Iran, where both sides exchanged fire, has led to the fragile ceasefire agreement coming back into the market narrative again," said Kelvin Wong, senior market analyst, Asia Pacific, at OANDA.

The United States and Iran exchanged fire on Thursday in the most serious test yet of their month-long ceasefire, but Iran said the situation returned to normal while the U.S. said it did not want to escalate.

London copper prices rose to a two-week high on Wednesday on reports that Washington and Tehran were closing in on an agreement on a one-page memorandum of understanding to end the war in the Gulf. Hopes of easing tensions in the Middle East provide relief for copper, a metal seen as a barometer of macroeconomic health and widely used in power and construction.

Oil prices rose after renewed escalations in the Middle East conflict dashed hopes of progress toward reopening the Strait of Hormuz, while the dollar firmed. O/R USD/

Among other LME metals, aluminium CMAL3 fell 0.2%, nickel CMNI3 lost 1.6%, lead CMPB3 was down 0.8%, tin CMSN3 shed 1.3% and zinc CMZN3 fell 0.4%.

On the SHFE, aluminium SAFcv1 held steady, nickel SNIcv1 fell 2.5%, lead SPBcv1 was down 0.9%, zinc SZNcv1 inched up 0.4%, while tin SSNcv1 rose 0.7%.