Iran War Slows Global Manufacturing Amid Energy Disruptions and Inflation

The ongoing war in Iran is having far-reaching consequences on global manufacturing activity. According to recent surveys, China's factories saw their new export orders slow to their weakest pace since January, amidst weaker demand and elevated input costs due to energy disruptions via the Strait of Hormuz.

The Eurozone's manufacturing growth in July reflected backlog clearance rather than fresh demand, with inflation rising to 2.9% and reinforcing the case for further ECB tightening. In contrast, Japan's factory output expanded at its fastest pace in over 12 years, supported by surging demand, especially in AI-related sectors.

Across the globe, factories from France and Turkey to India faced rising costs and supply chain strains. The situation is expected to continue unless there is a resolution to the Middle East conflict, as corresponding volatility in oil prices and uncertainty will persist.