Why investors are turning to critical minerals amid global tensions

Global investment themes are being increasingly shaped by a shifting world order, geopolitical tensions, and a growing focus on national self-sufficiency. The Trump Administration in the US has accelerated this trend by seeking to re‑nationalise strategic industries and pressure trade partners and economic competitors.

One area already benefiting from strong structural tailwinds that has gained even more attention is critical minerals, which refers to metals essential to modern technologies, industries, and national security, whose concentrated supply makes them vulnerable to disruption.

The geopolitics of critical metals

“Even before today’s geopolitical tensions, demand for many of these metals was already surging.”

The turning point came in the 2010s, when the rise of smartphones, renewable energy and electric vehicles began transforming markets for lithium, cobalt, rare earths and copper.

Governments started to formalise this shift around the same time. In the US, the Department of Energy flagged minerals like rare earths as strategic as early as 2010, after a Chinese export ban drove prices sky-high. The European Commission released its first Critical Raw Materials list in 2011 to identify supply risks for Europe’s tech and green industries. Australia followed more recently in 2019, publishing a national Critical Minerals Strategy and identifying 24 minerals of economic and strategic importance.

“Over the past two years, critical minerals have shifted from being a structural growth theme to a geopolitical flashpoint.”

In the US, the Inflation Reduction Act (IRA) introduced rules that restrict EV subsidies if the underlying minerals come from “foreign entities of concern,” effectively redrawing the map of who American automakers can buy from. In August 2025, the US Department of the Interior proposed to add copper and silver to its official list of critical minerals, underlining just how broad the security lens has become.

The European Union has also hardened its stance with the Critical Raw Materials Act, setting binding 2030 targets for local mining, processing and recycling, and capping reliance on any single foreign supplier.

Meanwhile, China has weaponised its dominance, imposing export controls on gallium, germanium and graphite – materials central to semiconductors and batteries. These moves have jolted Western industries and reinforced the perception that critical minerals are no longer just about economics but strategic leverage.

Critical minerals also look set to play a key role in future trade and security deals. Earlier this year, the US and Ukraine signed a memorandum of understanding giving American firms access to Ukraine’s graphite, titanium, lithium and neon reserves, a clear example of resource diplomacy tied to broader geopolitical goals.

These developing government policies point to the fact that critical minerals are no longer just an input growth story. They are strategic assets whose value and availability will be shaped as much by geopolitics as by market demand.

What investors need to know

“Structural demand is clear, but markets remain volatile in the short term.”

Mining is capital-intensive and supply additions are slow, meaning small shocks, like new projects, export restrictions, or policy shifts, can create sharp swings in prices. For example,

• Lithium surged with the EV boom in 2022, then fell in 2023–24 as new supply hit the market.
• Nickel spiked during supply anxieties in 2022, then dropped as Indonesia ramped up production.

Gallium and germanium jumped on Chinese export controls in 2023, highlighting how politics can trigger sudden price shocks.

For investors, these dynamics point to a few key principles:

1. Separate structural conviction from short-term noise: Building a diversified, allocation to electrification and critical minerals themes can benefit over the long term. Trying to trade short-term price swings can be challenging, investors could instead accept the inherent cyclical volatility and use market dips as opportunities to add to positions that fit the long-term narrative.
2. Diversify across metals and the value chain: Spread exposure across different metals (copper, lithium, nickel, rare earths) and along the supply chain, from miners to processors and recyclers. Using ETFs with exposure to a broader basket of companies allows investors to capture the overall theme while reducing reliance on any single company or commodity.

In a world where geopolitics is increasingly shaping investment themes and supply chains, investors who maintain conviction in the long-term narrative, accept short-term swings, and invest strategically can benefit from structural growth trends. Critical minerals, as the building blocks of clean energy, technology, and national security, could be set to remain at the centre of this opportunity for years to come.

Accessing the theme

“For investors looking to capitalise on the structural demand for critical minerals, an ETF that provides exposure to a basket of companies can assist with obtaining exposure without taking on too much single stock or project risk.”

Betashares Energy Transition Metals ETF (ASX: XMET) offers diversified exposure to key metals and the global supply chain. XMET, which has returned 45% over the past 12 months, and 10% p.a. since inception (as at 29 August 2025, incepted on 26 October 2022) has benefitted from long-term structural demand expectations and geopolitical tailwinds.

However, while the investment case for energy transition metals is clear, investors should remember to keep their positions sized appropriately. At the end of the day, investors should build a portfolio core with broad exposure to global and Australian equities, fixed income and other assets. Investors can then use more thematic exposures, like energy transition metals, as a way to add growth opportunities to their portfolio.

You can find more information on XMET here.