Global manufacturing PMI fell from 51.8 in February to 51.3 in March, after reaching a 44-month high in February. The fall was linked to the escalation of the US/Israel–Iran conflict, which began on 28 February.
Emerging markets, including China and India, led the weakening in manufacturing conditions. Developed markets appeared stronger, partly because delivery times became longer.
Global Supply Chains Under Stress
Longer delivery times were presented as a sign of supply disruption connected to the Iran conflict. A global supply bottlenecks index moved back into “dominant supply bottlenecks/excess demand” territory.
The report also pointed to higher input and output prices and rising global inflationary pressures. It referred to an upward adjustment of inflation forecasts for the eurozone, the Netherlands, the US and China.
The article was produced using an Artificial Intelligence tool and reviewed by an editor.
Looking back to the events of early 2025, we saw how quickly a geopolitical shock like the Iran conflict could impact global manufacturing. The PMI then dropped from a 44-month high as supply bottlenecks re-emerged almost overnight. This serves as a key reminder of how sensitive supply chains are to regional instability.
Positioning For Volatility
Currently, we are seeing some echoes of that period, creating an environment ripe for volatility. Although the latest S&P Global US Manufacturing PMI for March 2026 showed expansion at 52.5, the prices paid sub-index saw its sharpest increase in over a year. This suggests inflationary pressures are building beneath the surface, much like they did in 2025.
This trend is reinforced by the latest inflation data, with the March 2026 US Consumer Price Index coming in slightly above expectations at 3.1%. The persistence of this inflation means that market expectations for interest rate cuts may be too optimistic. This increases the likelihood of a “higher for longer” rate environment, which will directly impact valuations.
Given this, traders should consider buying protection against sudden market swings. Purchasing VIX call options or using straddles on major indices can be an effective way to hedge against rising uncertainty. These positions will benefit from an increase in implied volatility, which often accompanies geopolitical or economic surprises.
In commodity markets, the impact of supply constraints is already visible, with Brent crude recently climbing above $92 a barrel due to new shipping disruptions. We should use call options on oil and other industrial metals to gain upside exposure to further supply-driven price shocks. This allows for participation in price rallies while clearly defining our maximum risk.
The expectation of delayed rate cuts should also keep the US dollar strong. We can use options on currency pairs to position for continued dollar strength against currencies from more dovish central banks. Furthermore, executing interest rate swaps can help hedge existing portfolios against the risk that interest rates do not fall as anticipated.
