ASX 200 tumbles to a 2-month low and wipes out its 2026 gains. What on earth is going on?

The S&P/ASX 200 Index (ASX: XJO) is taking another hit on Friday, with investors facing one of the weakest stretches of the year.

At the time of writing, the benchmark index is down 1.28% to 8,706 points and trading around its session low.

That follows losses of 1.03% on Thursday, 0.11% on Wednesday, and 1% on Tuesday, meaning the ASX 200 has now fallen more than 3% in the past 4 sessions.

The rebound from Thursday's low of 8,742 points didn't last long either.

The index has now effectively wiped out its gains for 2026 and is around 6% below its 52-week high of 9,267 points.

So, what's worrying investors?

Oil, bond yields, and rate hikes

There is plenty happening at once, but rising oil prices and interest rate expectations are doing a lot of the damage.

Brent crude has jumped to US$107.87 a barrel as the conflict in the Middle East continued to disrupt energy markets.

That has added to inflation concerns and pushed bond yields higher around the world.

Australia's 3-year government bond yield climbed above 5% on Friday, reaching its highest level in around 15 years.

And rate expectations have moved quickly as well.

The RBA cash rate is currently at 4.35%, but markets are now pricing a high chance of another 25-basis point increase at the 29 September meeting.

Citi now reportedly expects hikes in both September and November, which would take the cash rate to 4.85%.

Miners are getting hit hard

The selling is widespread across the ASX 200, with 151 stocks falling, 47 rising, and just 2 unchanged.

Resources stocks are tanking after copper prices dropped more than 4% following reports that the US has delayed a decision on tariffs on refined copper.

BHP Group Ltd (ASX: BHP) shares are down 4.34% to $60.69, while Rio Tinto Ltd (ASX: RIO) shares have fallen 3.54% to $168.30.

Northern Star Resources Ltd (ASX: NST) shares are also down 3.66% to $21.715, and Evolution Mining Ltd (ASX: EVN) has dropped 4.56% to $13.695.

What should investors watch next?

The big question now is whether Friday's sell-off starts to settle down or carries into next week.

Investors will also be watching US inflation data due later today, which could influence expectations for another Fed Reserve rate rise.

I'll also be watching whether the weakness remains concentrated in miners or starts to spread into other parts of the market.