(Updates prices, adds analyst comment, changes dateline to

London)

By Polina Devitt

LONDON, June 30 (Reuters) - Aluminium prices were on track

to log their steepest multi-year quarterly and monthly drops on

Tuesday, as Middle East peace talks raised hopes of supply from

the region normalising.

Benchmark aluminium on the London Metal Exchange was

up 1.3% at $3,127.50 a metric ton by 0952 GMT, after hitting

$3,085 on Monday, its lowest since February 23.

For the quarter, it was down 10%, the steepest in three

years, while it slumped 15% in June, the biggest monthly fall

since the 2008 global financial crisis.

War in the Middle East, which accounts for 9% of global

output, pushed prices to a four-year high of $3,787.50 at the

start of the month before the peace talks drove oil prices lower

and eased supply concerns.

Despite markets moving to price in an end to the war,

traffic in the Strait of Hormuz, used by the Gulf producers for

exports and imports of raw materials, remains heavily

restricted, StoneX analyst Natalie Scott-Gray said in a note.

StoneX estimates that as much as 3 million tons of smelter

capacity was taken offline since the war began. Coupled with

some demand destruction in the coming months, mostly from the

auto sector, it expects the aluminium market deficit at 1

million tons this year.

Among other LME metals, copper rose 0.7% to $13,377 a

ton supported by upbeat factory data in top metals consumer

China. The metal is up 9% in the quarter on future AI

infrastructure expansion plans.

The correlation between the LME benchmark and the U.S.

technology stocks hit its highest level since 2012 this quarter

despite the end-use in this sector at less than 2% of total

demand, StoneX said.

Zinc rose 2.1% to $3,548.50 and was up 10% this

quarter, its best quarterly performance in two years, due to

tighter mine supply. It is the only LME metal ending June with

the forward curve in backwardation.

Lead fell 0.2% to $1,889.50 and nickel rose

1.0% to $16,470, while tin added 2.1% to $51,425.