BHP Billiton Limited (ASX: BHP) has played a key role in dragging the sharemarket lower today following a night to forget for commodity investors. The stock plunged 3.6% to trade at just $27.48, a loss of $1.03 per share, which compares to a 1.9% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
BHP Billiton is Australia's largest miner despite its recent $11 billion demerger of South32 Ltd (ASX: S32). Although its sheer size allows it to enjoy lower operating costs than most of its competitors, BHP is still just as exposed to unfavourable movements in commodity prices.
Overnight, oil stocks were amongst the biggest casualties on Wall Street with the market focused on a June 30 deadline for an Iran nuclear accord. If that agreement is reached, it could mean an eventual end to some sanctions against the nation, allowing it to export greater volumes of oil.
The global economy is still trying to deal with the supply and demand imbalance for the resource, so allowing Iran (which is believed to be home to the world's fourth-largest reserves) to increase its exports could have a negative impact on the price of oil.
As petroleum is BHP's second most important commodity, this would be bad news for the miner's earnings potential which would partially explain today's heavy decline.
Other energy and gas stocks such as Woodside Petroleum Limited (ASX: WPL), Senex Energy Ltd (ASX: SXY) and Origin Energy Ltd (ASX: ORG) have also plunged, with their shares trading 1.6%, 6.5% and 5.5% lower, respectively.
Meanwhile, the price of iron ore also fell overnight. Although the decline was only marginal, investors believe that this could be the beginning of another major slump which could dramatically reduce the miners' margins and overall profits over the coming years.
Notably, Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) have joined BHP in the red-zone with their shares trading 2.7% and 3.8% lower, respectively. Given the high level of uncertainty regarding the direction of commodity prices in the future, stocks within Australia's mining and energy sectors remain risky propositions.
Despite their somewhat discounted share prices, 'Foolish' investors would be better off playing it safe and putting their money to work elsewhere.
