Asia Factory Output Expands Amid Middle_East War

Asia's factory activity expanded steadily in May, primarily driven by companies stockpiling goods to mitigate potential supply shocks stemming from the Middle East conflict, particularly the U.S.-Israeli war on Iran. This conflict has disrupted global trade and raised concerns about energy supplies through the Strait of Hormuz. Countries like China, South Korea, Japan, Vietnam, Taiwan, Philippines, and India reported manufacturing expansion, with South Korea's activity reaching a five-year high. The surge in demand for artificial intelligence-related investments also contributed to the resilience in some Asian factories. However, rising raw material prices, fueled by the Middle East war, led to increased input costs for manufacturers, notably in Japan. International organizations like the International Energy Agency, International Monetary Fund, World Bank Group, and World Trade Organization have warned about the broader economic fallout of the conflict.