Factories from Germany to South Korea are absorbing blow after blow. Input costs have climbed at the fastest pace in years. Delivery times stretch longer. And demand, in many places, has gone quiet. The conflict centered on Iran, with its blockade of the Strait of Hormuz and strikes on key Gulf infrastructure, has turned what began as an energy crisis into a broad manufacturing shock.
Oil prices surged past $100 a barrel. Petrochemical feedstocks tightened. Aluminium, helium, and fertilizer supplies tightened further still. Companies responded with stockpiling in some regions. Others simply passed higher expenses downstream. But the cumulative pressure now shows in survey after survey. Global manufacturing feels the strain of war-driven shortages.
Just last month European factories confronted the sharpest rise in raw-material costs in four years. The Investing.com report drawn from S&P Global data shows the euro zone manufacturing PMI slipped to 51.6 in May from 52.2 the prior month. Expansion continued, yet barely. Germany’s output stalled. French factories slipped into contraction for the first time since November. Chris Williamson, chief business economist at S&P Global, said manufacturers were “struggling under weight of rising prices and supply disruptions.”
British plants faced even steeper pressure. Input prices jumped at the fastest rate since June 2022. Chemical and steel producers there, along with counterparts across the EU, imposed surcharges as high as 30 percent to cover electricity and feedstock spikes. Some executives now openly discuss the risk of permanent deindustrialization in energy-intensive sectors. The numbers tell a sobering story. Sulphur and sulfuric acid prices climbed 30 percent. Nitrogen fertilizer costs could double. All because Gulf production, which accounts for roughly 45 percent of global sulphur supply, was disrupted.
Damage assessments paint an even darker picture. Qatar’s Ras Laffan complex, responsible for 20 percent of worldwide LNG and a substantial share of helium, suffered direct hits. Repairs could take three to five years. A Wikipedia compilation of verified reports puts the bill for damaged Middle East energy facilities near $25 billion. Khuzestan Steel in Iran saw its furnaces wrecked; managers there said full restoration would require at least six months. Emirates Global Aluminium and Aluminium Bahrain also took strikes. The resulting shortage of automotive-grade metal has already reached Toyota, Nissan, BMW, and Hyundai assembly lines.
But not every region slowed. In the United States, factories ramped up. The ISM manufacturing PMI climbed to 54.0 in May from 52.7. Output reached its highest level in four years. New orders surged as companies front-loaded purchases to beat expected price hikes and delivery delays. Supplier lead times stretched to the longest in four years. Input costs stayed elevated. American manufacturers, in short, bought insurance against the very shocks hammering Europe.
Asia told a mixed tale. China’s private Caixin PMI held above 50 for a sixth straight month, coming in at 51.8 in May, though the official state survey stalled near the break-even line. South Korea recorded its strongest expansion in five years at 54.8. Japanese factories kept growing even as their input prices rose at the sharpest clip since September 2022. Vietnam, Taiwan, and the Philippines also posted gains. Yet analysts cautioned that these readings masked fragility. An earlier Reuters survey roundup from April noted that supply disruptions had lengthened delivery times and distorted headline PMIs. “The supply shock is falsely elevating the headline index,” Williamson observed at the time.
The mechanics are straightforward. Roughly one-fifth of global oil and a sizable slice of LNG normally pass through the Strait of Hormuz. When Iran effectively closed the chokepoint in early March, Brent crude leaped from around $72 to more than $112 per barrel at peak. Shipping routes lengthened. Insurance premiums spiked. Freight rates followed. A subsequent Reuters analysis in May tallied at least $25 billion in direct costs already borne by companies worldwide. That figure continues to climb. Airlines absorbed jet-fuel shocks. Plastics producers watched polyethylene prices soar. Semiconductor plants scrambled for helium, essential for cooling wafers during fabrication.
Food systems feel secondary effects. Fertilizer shortages threaten next year’s harvests. Urea and phosphate prices have jumped 40 percent or more in some markets. A Gulf energy minister captured the concern early on. “Energy prices will rise for everyone, there will be shortages of some products, and there will be a chain of negative reactions for factories that will not be able to secure supplies,” he warned, according to records cited in economic summaries of the conflict.
Central bankers now wrestle with the inflation side of the equation. The European Central Bank has postponed rate cuts. UK inflation has pushed above target. In Asia, import-dependent economies from the Philippines to South Korea contend with higher diesel and plastic-resin costs. Some cosmetics makers in the region reported hunting frantically for alternative resin supplies after traditional Middle East sources dried up. Auto executives quietly admit that production stoppages could appear by late summer if shortages intensify.
Longer term the picture grows more complex. Rerouting of vessels around Africa adds weeks to transit times. Mining operations that rely on diesel face higher expenses. Construction firms absorb fuel surcharges on everything from steel delivery to concrete mixing. Even sectors far removed from energy feel the pressure through packaging, chemicals, and component costs. And yet some pockets of resilience exist. American stockpiling has kept output humming. Certain Asian exporters have gained temporary share as buyers diversify away from vulnerable routes.
The war has already saddled global business with a $25 billion bill. Repair timelines for stricken LNG and aluminium facilities stretch years. Supply-chain managers who once boasted of just-in-time efficiency now scramble for buffer stocks they once dismissed as wasteful. Executives speak of non-linear risks: the point at which factories simply cannot secure the inputs they need and output collapses.
Markets have priced in some of this pain. Equity analysts flag winners among certain U.S. shippers and alternative energy plays. Most sectors, however, count losses. Consumer-goods producers warn that higher costs will reach shelves before the year ends. Retailers already report passing along increases in plastics, packaging, and transport. The full ledger remains open. How long the Hormuz disruption persists, how quickly damaged plants return, and whether further strikes occur will decide whether this shock fades or settles into a new, more expensive normal for manufacturers everywhere.
One thing is already clear. The conflict has exposed how tightly coupled modern industry remains to a handful of critical sea lanes and raw-material clusters. Factories once distant from the Persian Gulf now count its stability among their most material risks. Adaptation has begun. But it carries a steep price tag measured in higher costs, slower growth, and, in some cases, permanently altered production footprints.
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