The standoff in the Strait of Hormuz due to the US-Israeli war on Iran has caused a widespread product delivery and supply chain disruption, a phenomenon last seen in 2022 (the year in which the Ukraine war started). At this uncertain backdrop, a gauge of British manufacturers’ cost pressures jumped in April, according to a survey that underlined the conflict’s impact.
The S&P Global UK Manufacturing Purchasing Managers’ Index rose to 53.7 in April from 51.0 in March. The final reading was slightly higher than the 53.6 in the provisional April data.
Since the US-Israeli war on Iran began in late February, international shipping has been disrupted, and the vital sea channel remains closed, choking off 20% of the world’s supplies of oil and gas and sending global energy prices surging.
The attacks by Houthi forces in Yemen have also caused many vessels to avoid the Red Sea route to the Suez Canal, with some instead opting for the much longer route around the southern tip of Africa.
“The restrictions on ships trying to transit the Strait of Hormuz have extended delivery times to the longest since February 2020,” S&P said. Despite the survey indicating an increase in factory output and new orders in April, manufacturers’ input costs surged at the most rapid pace since June 2022.
“The gain in production is partly the result of clients bringing forward purchases to mitigate expected price uplifts and supply disruptions,” said Rob Dobson, director at S&P Global Market Intelligence.
“As this process unwinds later in the year, alongside declining business optimism, growth in the sector could cool while inflationary pressures remain on high heat,” the official remarked further.
There was also some evidence of businesses passing on rising costs, with the PMI’s measure of average selling prices rising at the sharpest rate since November 2022.
Business optimism about the coming 12 months fell to its lowest level in a year, with survey respondents noting concerns about the impact of the Middle East conflict and the consequences of government policies.