ASX Mining Sub-Index Drops 2.9% Amid Geopolitical Tensions, BHP (ASX:BHP) and Rio Tinto (ASX:RIO) Slump

Key Points:

• Australian mining sub-index has fallen 2.4% so far this week, heading for its worst week since early September.
• The index has tracked declining global copper prices, affected by rising geopolitical tensions.
• BHP Group has lost 1.4% this week, on track to break a three-week winning streak.
• Rio Tinto has shed 4.2%, facing its worst weekly performance since mid-August.
• The mining sub-index dropped as much as 2.9% on Friday, the largest intraday decline since early September.

Australian mining stocks faced a sharp decline this week as global copper prices fell, driven by geopolitical tensions. The mining sub-index (.AXMM) dropped 2.4% so far this week, heading for its worst weekly performance since the week ending September 6, if current trends hold. By Friday morning, the sub-index was down as much as 2.9%, marking its largest intraday fall since early September.

The Australian mining sector, heavily influenced by global commodity prices, has been particularly affected by the ongoing geopolitical turmoil. Copper prices have weakened amid rising tensions in the Middle East and concerns over a broader conflict impacting the global economy. The base metal is often seen as a bellwether for global economic health, and its recent downturn has weighed heavily on mining stocks.

BHP Group (ASX:BHP), the sector heavyweight, has shed 1.4% so far this week. If current trends persist, BHP is on track to snap a three-week winning streak, having previously benefitted from favorable commodity prices and demand from China. However, with copper prices falling, the mining giant is seeing some of its recent gains eroded.

Iron ore miner Rio Tinto (ASX:RIO) has fared even worse, with its stock down 4.2% for the week. The company is set for its worst weekly performance since mid-August, reflecting the broader challenges faced by the sector. Rio Tinto has been under pressure as iron ore prices remain volatile, with demand from key markets like China fluctuating due to both economic conditions and geopolitical factors.

Overall, the mining sub-index is down 11.6% year-to-date, reflecting the sector’s struggles in 2024. The decline has been driven by a combination of factors, including weaker demand for key commodities, geopolitical instability, and economic uncertainty in global markets. The sector’s performance on Friday added to the week’s losses, with the sub-index down nearly 3% intraday—its steepest decline in over a month.

This downturn in the mining sector is largely in line with global trends, where heightened geopolitical tensions have weighed on investor sentiment. The conflict between Israel and Hezbollah, as well as potential U.S. strikes on Iran’s oil facilities, have created significant uncertainty in global markets. As copper prices continue to decline, mining stocks are bearing the brunt of the negative sentiment.

Despite this challenging environment, some analysts remain cautiously optimistic about the long-term prospects for Australian miners. While the immediate outlook is clouded by geopolitical risks and commodity price fluctuations, the sector could see a recovery if global demand for copper and other key metals stabilizes. Furthermore, China’s ongoing efforts to stimulate its economy could eventually lead to increased demand for Australian exports, providing some relief to miners like BHP and Rio Tinto.

For now, however, the sector remains under significant pressure, with mining stocks set for one of their worst weeks in recent months. Investors will be closely watching developments in the Middle East and global commodity markets, as these factors will likely determine the short-term trajectory for Australian mining stocks.

In the broader market, Australian shares were also impacted by the mining sector’s decline, with the S&P/ASX 200 index falling by 1.1% on Friday. While energy stocks benefitted from rising oil prices amid concerns of a disruption in global crude flows, the gains in that sector were not enough to offset the losses in mining and other sectors. Financial stocks also declined, contributing to the overall weakness in the Australian market.