Asia manufacturing sector faces rising costs and supply-chain disruption
Updated
Updated · The Wall Street Journal · May 4
Asia manufacturing sector faces rising costs and supply-chain disruption
11 articles · Updated · The Wall Street Journal · May 4
April PMIs rose in Taiwan, Japan and South Korea as firms and customers stockpiled, while Taiwan's expenses neared record survey highs and South Korea reported record cost increases.
Input costs also hit multiyear highs in Japan, Indonesia and Vietnam, while India’s factory growth stayed sluggish and Vietnam’s new orders fell for the first time in eight months.
The conflict, which began in late February, has driven up energy and commodity prices, and analysts warn output could weaken across Asia once stockpiling fades and trade flows normalize.
Is Asia's manufacturing boom a mirage, masking a severe recession triggered by the Middle East war?
How is the AI boom turning the Middle East supply shock into a perfect storm for Asia's economies?
With Middle East supplies cut, will Asia pivot to renewables or double down on fossil fuels for security?
Asia’s Manufacturing Crisis in 2026: Energy Inflation Surges Above 10% Amid Middle East Conflict
Overview
The US-Israeli conflict with Iran in early 2026 led Iran to restrict shipping through the Strait of Hormuz, a vital route for global oil. This caused oil prices to surge from around $65 to $119 per barrel and LNG prices to jump by 39%, while war-risk premiums increased shipping costs. These energy shocks and supply chain disruptions triggered soaring input price inflation, forcing Asian manufacturers to cut production and pushing thousands of SMEs toward insolvency. Governments responded with fuel price controls and emergency measures, while companies diversified supply chains and invested in renewables. The crisis deepened inflation, job insecurity for millions of migrant workers, and food insecurity, accelerating a shift toward regionalized, resilient manufacturing in Asia.