Two of the biggest winners during earnings season were Rio Tinto Ltd (ASX: RIO) and BHP Group Ltd (ASX: BHP).
BHP shares rocketed 16% higher during February, while Rio Tinto shares climbed 13%.
Both ASX mining giants hit yearly highs during this time, however since then, have lost significant ground.
Image source: Getty Images
Why are these miners falling?
Since hitting yearly highs, BHP shares have fallen roughly 16%, while Rio Tinto shares have dropped just over 6%.
It's possible this is a combination of a slightly inflated share price along with ripple down effects from the developing conflict in the Middle East.
The importance of the Strait of Hormuz for global oil supply has been well-documented over the past couple of weeks
Although BHP was not directly exposed to an oil supply shock, it remains highly vulnerable to the ripple effects.
One major reason is its heavy reliance on fuel inputs – particularly diesel. This represents a significant portion of the company's cost base.
Large-scale mining operations require enormous amounts of fuel to power extraction equipment, haulage fleets, and the transportation networks.
Interruptions to fuel supply therefore pose a serious operational and financial risk to the miner.
In addition, many of the largest consumers of oil and petroleum products passing through the Strait of Hormuz are in Asia – most notably India and China.
These countries are also among BHP's most important customers.
If energy shortages were to disrupt operations at Chinese steel mills or refineries, demand for key raw materials could quickly decline.
In such a scenario, companies like BHP would likely be among the first suppliers contacted to delay or cancel shipments of commodities such as iron ore and copper.
It's worth noting that BHP chairman Ross McEwan reinforced in early March that the global mining giant sees "little immediate impact from the US-Iran conflict."
For Rio Tinto, increased shipping costs, insurance premiums, and uncertainty in supply chains for metals could be weighing on sentiment.
Higher commodity prices could theoretically boost revenues in the short term. Meanwhile logistics risks, energy costs, and market volatility create uncertainty for the company and its investors.
What are experts saying?
After recent share price declines, investors may be considering buying the dip in these blue-chip stocks.
On Friday, Morgans upgraded Rio Tinto shares to a hold rating (previously trim).
The broker now has a price target of $147.00.
However, from last week's closing price of $157.89, that indicates a potential downside of approximately 7%.
Meanwhile, for BHP shares, 16 analysts forecasts via TradingView have an average one year price target of $53.02 on the company.
From last week's closing price, that indicates an upside of 6.46%.
