With iron ore prices recently falling below $100, concerns are mounting about the outlook for Australia's largest iron ore companies. So, are we facing a potential crisis, or is this a rare chance to acquire major mining stocks at a discount?

The ongoing economic slowdown in China and broader global instability have driven iron ore prices down to around $98—well off the mid-2021 peak of $220. However, the $98 dollar level has acted as a springboard for price gains in the past, suggesting a potential bottom may be near.

Which stocks would benefit if iron ore prices rose?

Australia's heavy reliance on the materials sector means that fluctuations in iron ore prices have a significant impact on its biggest companies. While giants like BHP and Rio Tinto are closely tied to iron ore, some specialised stocks in the sector could benefit greatly if prices rebound. Here are three companies to watch:

Bluescope Steel (ASX: BSL)

BSL recently reported a FY24 net profit after tax of $805.7 million, down $203.5 million from the previous year due to lower steel prices and rising input costs. Despite these challenges, the stock has maintained an uptrend since 2012, and if it breaks through $24, a rally towards $30 in the medium term could be on the horizon.

Mount Gibson Iron (ASX: MGX)

MGX posted a FY24 net profit after tax of $6.4 million, a significant improvement driven by higher production volumes and favourable prices. Although the stock has been in a downtrend since May 2019, this positive news could signal a potential turning point. However, without clear confirmation of a price reversal, waiting for further developments in price would be the best approach.

Fortescue Metals (ASX: FMG)

FMG is set to report FY24 results on 28 August, expecting a net profit after tax of US$5.88 billion, marking a notable increase from last year. The stock has seen a sharp decline since peaking in February 2024, now down over 40 per cent. However, given the three previous corrections in Fortescue have been around 50 per cent, there could be buying interest soon.

If the iron ore prices recover, these companies' share prices could see a rapid increase. Therefore, watch closely for any upcoming opportunities.

What were the best and worst-performing sectors last week?

The best-performing sectors included Information Technology, up 8.65 per cent, followed by Industrials, up 2.14 per cent and Materials, up 1.79 per cent. The worst-performing sectors included Energy, down 3.28 per cent, followed by Real Estate, down 1.07 per cent and Financials, down 0.11 per cent.

The best performing stocks in the ASX top 100 included WiseTech Global, up 28.15 per cent, followed by Charter Hall Group, up 15.08 per cent, and Brambles, up 14.90 per cent. The worst-performing stocks included the A2 Milk Company, down 17.69 per cent, followed by Paladin Energy, down 7.51 per cent, and Dexus, down 6.32 per cent.

What's next for the Australian stock market?

The All Ordinaries Index gained over half a percent last week, building on the momentum from the previous week’s buying activity. As a result, the market has now reached a critical price level that warrants attention.

Since mid-July 2024, the All Ords has failed to provide a weekly close above 8,209 points, despite trading at or above this level on five separate occasions. There's a saying that professionals close the market, and with the index closing above 8,209 for the first time since July, we can confirm buyer strength, which will likely see the market now push to break the previous all-time high of 8,375.80.

Given reporting season’s impact on market direction, the final round of results will play a decisive role in determining the market's next move. So far, the season has been positive, with more companies exceeding expectations, though the overall performance is down from last year.

With major players like BHP, Fortescue Metals and Ramsay Healthcare yet to report, expect volatility in the coming week with positive results providing the catalyst to drive the market to new all-time highs.

Additionally, this week's CPI numbers are crucial to watch. A favourable inflation reading could push policymakers closer to an interest rate cut, which would further support rising market prices.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.