Asian manufacturing activity maintained a steady upward trajectory in May, driven largely by companies aggressively stockpiling inventory to shield themselves from potential supply chain disruptions linked to the ongoing conflict in the Middle East. As global institutions like the IMF and the World Bank warn of the war’s mounting pressure on energy supplies, businesses across the region are taking proactive measures to prevent product shortages and mitigate volatile input costs. This trend is particularly evident in nations like South Korea, Japan, and Taiwan, where industrial output remains robust despite the looming economic uncertainty.

Beyond the defensive stockpiling, a significant surge in demand for artificial intelligence-related technology is providing a critical tailwind for the region's factories. South Korea, for instance, reported its strongest export growth in over forty years, fueled by a massive appetite for semiconductor chips needed for AI investment. While rising raw material prices—compounded by the instability near vital shipping routes like the Strait of Hormuz—continue to weigh on manufacturers, the combination of strategic inventory building and the AI boom has kept the manufacturing sector resilient across key markets such as India, Vietnam, and Taiwan.