Manufacturers worldwide are feeling the impact of rising global factory input costs caused by the Iran war, as they face higher expenses and supply chain disruptions
In March, factories across multiple regions reported higher input costs and delivery delays, largely driven by the ongoing conflict and its impact on global logistics networks. The war has disrupted key shipping routes, particularly around the Strait of Hormuz, causing delays and increasing transportation costs.
As energy prices surged, manufacturers were forced to raise selling prices, adding pressure to already fragile economic recovery efforts. Recent surveys show that headline Purchasing Managers’ Index (PMI) figures may not fully reflect real economic conditions.
Economists noted that longer delivery times artificially boosted some PMI readings, masking underlying weakness in demand.
In the euro zone, the PMI rose to 51.6 in March, indicating expansion, but analysts warned that the increase may be misleading due to supply shocks.
Performance varied across countries. Germany and Italy recorded their strongest readings in years, while Spain remained in contraction territory.
Greece and Ireland showed stronger growth, while France’s manufacturing sector stagnated. In the UK, cost pressures surged, and delivery delays reached their highest levels since mid-2022, largely due to shipping disruptions.
Asian economies are particularly vulnerable, as they rely heavily on oil shipments passing through the Strait of Hormuz. In countries like the Philippines, diesel prices have sharply increased, while industries in Vietnam and South Korea face shortages of key materials such as plastic resin.
China’s manufacturing sector continued to expand, though at a slower pace, amid intensifying inflation and supply chain issues. Meanwhile, manufacturing activity slowed in Indonesia, Vietnam, Taiwan, and the Philippines, reflecting the broader regional strain.
Read: Trump ties Iran ceasefire to reopening Strait of Hormuz
Japanese factories faced rising costs and weakening business confidence, with input prices hitting their highest level in over a year. In contrast, South Korea stood out as an exception, with factory activity growing at its fastest pace in more than four years, supported by strong semiconductor demand.
The data highlights the difficult environment facing global manufacturers, as rising energy costs, supply disruptions, and geopolitical uncertainty continue to weigh on production. Policymakers now face increasing pressure to manage inflation while supporting economic growth in an unstable global landscape.
