ASX mining shares have been the worst hit by the Iran war, with the materials sector falling 14.15% so far this March.
A stronger indicator of the decline is the S&P/ASX 300 Metal & Mining Index (ASX: XMM), which has dropped 14.6% this month.
The US and Israel began hitting Iran on 28 February (US time), sending oil prices skyrocketing and ASX shares lower.
As we reported earlier, ASX shares have experienced their steepest fortnightly fall since June 2022, when inflation surged to 6.2%.
Energy is the only riser among the 11 market sectors since the war broke out, while materials is the biggest faller.
The Iran war has caused a global fuel crunch, which has direct implications for mining operations.
Mining companies need fuel to run large machinery and processing plants.
They now face higher fuel costs, and there may be shortages if the conflict continues much longer, potentially impacting production.
There are market impacts, too.
ASX mining shares have been on a tear as Australian investors embrace what appears to be the dawn of a new long-term mining boom.
However, the war in Iran has dampened investor sentiment.
This is potentially prompting some investors holding ASX mining shares to take their impressive short-term profits now.
Lower sentiment is driving a 'risk-off' appetite, leading some investors to prefer to 'wait and see' before investing further.
Warwick Grigor from mining specialist Far East Capital notes the trend, particularly in relation to ASX gold mining shares, commenting:
After being surprisingly resilient to the fluctuations in the gold price whilst toying with a market correction, the downward movement in many stocks accelerated last week, reflecting a heavy downward shift in sentiment.
Interestingly, the hardest hit stocks were in the gold sector. The doesn't quite make much sense. Maybe it was profit taking.
Since the war began, the gold price has fallen by 5%, while the S&P/ASX All Ords Gold Index (ASX: XGD) has declined by 20.8%.
Image source: Getty Images
Should you buy the dip?
Buying the dip means buying ASX shares that have experienced a share price decline.
Arguably, the best time to buy the dip is when ASX shares have fallen due to poor short-term sentiment, not company-specific issues.
As we've reported, Australia appears to be at the dawn of a new mining boom, with 5 key factors driving a new commodities supercycle.
Those five factors are unchanged by the war in Iran. In fact, the war has highlighted the growing importance of several of them.
What's happening with the major ASX mining shares?
The market's largest ASX mining share has fallen significantly since the Iran war began.
This month, the BHP Group Ltd (ASX: BHP) share price has decreased by 15.4%.
Today, the BHP share price is $49.42, up 0.47%, but well down on its historical record of $59.39 reached on 3 March.
Bank of America retains a buy rating on BHP shares with a 12-month price target of $68.
Several other brokers rate the mining stock a hold.
Last week, RBC Capital reiterated its hold recommendation on BHP shares and raised its target from $55 to $57.
The Rio Tinto Ltd (ASX: RIO) share price has fallen 6.3% since the war broke out.
Today, Rio Tinto shares are $156.74, up 1.3%.
Morgan Stanley kept its hold rating on Rio Tinto shares last week and lifted its target from $140 to $146.
The Fortescue Ltd (ASX: FMG) share price has dropped 7.4% in March so far.
Today, Fortescue shares are $19.59, down 0.5%.
Last week, RBC Capital reiterated its hold recommendation on Fortescue shares and reduced its price target from $23 to $21.
The market's largest ASX gold mining share, Northern Star Resources Ltd (ASX: NST) has fallen 33.2% in March, however, company-specific issues have contributed to the dramatic drop.
Today, the Northern Star Resources share price is $20.19, down 2.1%.
Yesterday, Morgans kept its buy rating but reduced its 12-month target from $35 to $30 after the miner's second guidance downgrade.
The market's largest ASX lithium mining share, PLS Group Ltd (ASX: PLS), has fallen 10.7% since the war began.
The PLS Group share price is $4.64 today, down 2.6%.
Last week, UBS reiterated its hold rating with a $4.95 target, while RBC Capital kept its buy rating and raised its target from $5.20 to $5.40.
