Supply chain stress hits 3‑year peak on Middle East war, energy shock
Manufacturers worldwide scrambled to stockpile goods as oil shock sends transport costs surging.
Global supply chain pressures surged to their highest level in three years last March, driven by the energy price shock and maritime disruption triggered by the ongoing war in the Middle East, according to the GEP Global Supply Chain Volatility Index released by S&P Global.
The index — which tracks demand conditions, shortages, transport costs, inventories and backlogs across some 27,000 businesses worldwide — jumped sharply to 0.57 in March from 0.09 in February, its highest reading since January 2023.
Manufacturers across all major regions responded to the disruption by aggressively building up safety stocks, with reports of inventory accumulation reaching a three-year peak.
The move came as factories simultaneously cut purchasing volumes amid mounting uncertainty from the conflict.
Despite the pullback in demand, material shortages hit their worst level since April 2023, pointing to the rapid emergence of supply bottlenecks. Availability of polymers, PVC, rubber, aluminium and copper deteriorated most noticeably.
Surging oil prices pushed global transport costs to a four-year high. The blow was felt most acutely across Asia, given the region’s heavy dependence on Middle East crude. Taiwan, Vietnam, South Korea and Japan all recorded sharp rises in producer price inflation during the month.
Asia’s sub-index leapt to 1.16 from 0.40 — its highest since August 2022.
In North America, the index climbed to a 39-month high of 0.42, whilst Europe registered its most intense supply chain pressure since January 2023. European manufacturers led all regions in safety stockpiling activity.
“The war is pushing up costs, triggering stockpiling and creating shortages across supply chains, but it has not yet escalated into a broad-based shock that materially slows global economic growth,” said Mukund Acharya, vice president for consulting at GEP.
“Companies need to secure supply where it matters most while avoiding broad stockpiling that can lock in higher costs.”
Labour shortages also ticked up to a three-month high, though they remained only slightly above historical averages.
Malaysia’s manufacturing sector recorded a more measured performance in February 2026, according to the latest figures released by the Department of Statistics Malaysia (DOSM).
The value of sales in the sector rose year on year, though the pace of growth eased compared with previous months. The expansion was largely supported by continued demand in key sub-sectors, particularly food, beverages and tobacco, as well as electrical and electronic products.
On a month-on-month basis, however, sales declined, reflecting typical seasonal factors and softer production activity following the start of the year.
Employment in the manufacturing sector remained broadly stable, with a modest increase in the number of workers. Salaries and wages continued to trend upwards, indicating sustained labour demand despite the slower growth in output.
Meanwhile, productivity — measured by sales value per employee — showed a slight improvement compared with the same period last year, suggesting incremental efficiency gains within the sector.
Overall, the February data point to a manufacturing industry that remains on a growth trajectory, albeit at a more moderate pace, as firms navigate softer global demand and ongoing economic uncertainties.
