July 1 (Bloomberg) -- Demand for industrial commodities including oil will fall, pressuring prices, because the financial sector is in ``disarray'' and the U.S. economy will continue to slump, investor Marc Faber said.

``The industrial-commodity complex is vulnerable because demand will slow down,'' said Faber, publisher of investment newsletter the Gloom, Boom and Doom Report. ``The economy is weakening, corporate profits will disappoint, valuations are not particularly attractive, and the financial sector that serves to channel savings into investment is in disarray.''

Demand for commodities will fall after raw materials including oil, corn, copper and gold touched record highs in the first half, Faber said in an interview on Bloomberg Television. The global economic slowdown will last a ``very long time,'' he said.

``The financial crisis has been the appetizer,'' Faber said, referring to the $400 billion in writedowns at the world's largest banks and securities firms in the past year. ``We still need the main dish.''

Commodities finished their best first half in 35 years yesterday, as the Reuters/Jefferies CRB Index of 19 raw materials jumped 29 percent through June 30. The next six months may not be as rewarding because higher prices may crimp consumption and encourage supply growth. A slowdown in U.S. economic expansion may also curb demand.

Hidden Recession

The U.S. economy went into recession last October and current statistics are hiding the ``severity'' of the recession, Faber said. Economists have also understated the rate of inflation as higher food and energy costs impact consumers, he said.

Commodities will face a ``correction'' after a seven-year rally and prices will decline in the next six months to one year, Faber said on June 26. Faber told investors to abandon U.S. stocks a week before 1987's so-called Black Monday crash.

Still, crude oil may reach $200 a barrel if tensions escalate with Iran, Faber said. Oil, which has surged 48 percent this year, touched a record $143.67 yesterday on speculation that Israel will attack Iran.

``Even $200 is possible if they go and bomb Iran,'' Faber said.

To contact the reporter on the story: Millie Munshi in New York at mmunshi@bloomberg.net; Monica Bertran in New York at mbertran@bloomberg.net.

Last Updated: July 1, 2008 16:59 EDT