Global manufacturing PMIs stayed above 50 in March for an eighth consecutive month, although growth slowed from February’s 44-month high. Performance in Asia helped offset continued contractions in Emerging Europe, including Türkiye, Russia and Poland.
India’s preliminary PMI was the weakest in nearly 3.5 years, yet it was still the second strongest reading among 27 countries. This kept India near the top of the country sample despite the slowdown.
Iran Conflict And Supply Chain Effects
The Iran conflict, which began on 28 February, coincided with higher reported input price inflation and renewed supply-chain delays. Employment and stockpiling were broadly stable, and business confidence pointed to only modest disruption to production linked to the war.
Looking back at the data from March 2025, we saw a misplaced sense of optimism. Business confidence was surprisingly high, expecting only modest disruption from the Iran conflict that began that February. This view was supported by an eighth straight month of expansionary global manufacturing PMIs, even as price pressures began to build.
That initial confidence proved to be short-lived, as the supply-chain issues became more persistent than anticipated throughout the rest of 2025. We now see that the global manufacturing PMI has softened considerably, with the latest March 2026 reading at a fragile 50.1, a stark contrast to the 44-month high seen in early 2025. This indicates that the expected resilience was overestimated, and growth has materially slowed.
The input price inflation mentioned in last year’s report has evolved into stubbornly high core inflation, which has kept central banks from cutting rates as aggressively as the market had hoped. For example, the latest Core PCE data for February 2026 came in at 3.1%, well above target and fueling market uncertainty. This stickiness in prices suggests the initial war-related disruptions had a much longer tail than first thought.
Market Volatility And Trading Implications
Given this divergence between last year’s expectations and today’s reality, volatility is the main theme. The VIX index is now hovering around 22, reflecting heightened uncertainty about inflation and geopolitical tensions. Traders should consider buying options to protect against sharp market swings or to position for further price chop in major indices.
We should also revisit the regional divergences noted in 2025, as Asia’s outperformance has continued. Using derivatives to structure pair trades, such as going long on futures for India’s Nifty 50 while hedging with shorts on European indices, could exploit this ongoing trend. The resilience in specific Asian markets remains a key factor, even as the global picture has weakened.
The supply chain pressures that first appeared after the conflict are still a factor, especially in energy markets. Traders should look at options on crude oil and industrial metals to hedge against further price shocks. The cost of shipping raw materials remains elevated, creating opportunities for those positioned for continued friction in global trade.
