S&P Global: Global PMI Hit Highest Level Since May 2024 in February Before Iran War Disruption

The global economy was, in February, doing surprisingly well. S&P Global's composite Purchasing Managers' Index reached its highest reading since May 2024 last month, suggesting that business activity across manufacturing and services was expanding at a pace that would have made for a genuinely encouraging economic story — if the world had stayed still. It did not. The US-Israeli strikes on Iran began, the Strait of Hormuz became effectively impassable for commercial shipping, oil crossed a hundred dollars a barrel, and financial markets repriced global growth expectations downward in real time. February's strong PMI reading now looks less like a launchpad and more like a high-water mark before the flood.

What the February PMI Was Actually Telling Us

The Purchasing Managers' Index is one of the most closely watched leading indicators in global economics because it captures real-time business sentiment from procurement managers and company executives who are making actual purchasing and hiring decisions. A reading above 50 signals expansion; below 50 signals contraction. The February composite reading — covering both manufacturing and services across the major economies — coming in at its highest level since May 2024 was a genuine positive signal, not a statistical artifact or a single-country outlier.

The strength was reasonably broad-based. Services activity in the United States and several European economies had been holding up despite ongoing interest rate pressures. Manufacturing PMIs, which had been in contraction territory for much of 2024 and into early 2025, were showing signs of stabilization and in some cases genuine recovery, particularly in export-oriented economies benefiting from recovering global trade volumes. The February reading was the kind of data that gives central bankers cautious optimism and gives equity analysts reason to revise earnings estimates upward.

Why March Data Will Tell a Very Different Story

PMI surveys capture sentiment and activity in real time — they reflect what purchasing managers are experiencing and expecting in the current month. March's survey data will be collected against a backdrop that is categorically different from February's. Oil prices are at three-year highs. Shipping costs are surging as major carriers reroute around Africa. Fertilizer prices are spiking, raising agricultural input costs. The February US jobs report showed a net loss of 92,000 positions. Business confidence in energy-dependent industries is deteriorating visibly.

The PMI methodology captures this kind of sudden shift well. When purchasing managers are being told by their logistics teams that lead times have doubled and freight costs have surged, that shows up immediately in the supplier delivery times and input cost components of the index. When companies freeze hiring or accelerate layoffs in response to economic uncertainty, employment sub-indices reflect that within the same survey cycle. Analysts expecting a sharp deterioration in March PMI readings are probably right, and the gap between February's peak reading and whatever March delivers will be one of the clearest measurements of the Iran war's near-term economic impact.

Services vs. Manufacturing: Which Holds Up Better

Not all sectors respond to geopolitical oil shocks in the same way or on the same timeline. Manufacturing PMIs tend to react faster because goods production is directly exposed to energy costs, freight disruptions, and raw material supply chains. A manufacturer paying more for inputs and facing longer delivery times from suppliers adjusts their forward purchasing and hiring plans immediately. That adjustment shows up in next month's PMI survey with minimal lag.

Services PMIs are typically more insulated in the initial phase of an oil shock, but the insulation is not permanent. Consumer-facing services begin to feel the impact when rising energy and food costs compress household discretionary spending. Business services contract when corporate clients cut costs in response to margin pressure from higher energy inputs. Financial services react to market volatility and tightening credit conditions. The services sector's apparent resilience in the early weeks after an oil shock often masks a deterioration that fully materializes in subsequent PMI readings rather than the immediate one.

Regional Divergences That Will Shape the March Reading

Not every major economy faces the same exposure to the Iran war's economic consequences, and March PMI data will likely reflect significant regional divergence. Japan and South Korea, as large net energy importers with manufacturing-heavy economies, face acute exposure to the oil price shock and supply chain disruptions. Europe's energy-intensive industrial base — already struggling with elevated electricity costs from the Russia-Ukraine conflict — faces another external energy shock on top of existing structural challenges.

The United States occupies an unusual position in this analysis. As a major oil producer in its own right — the world's largest — the US economy has a natural partial hedge against oil price spikes that pure importers lack. US energy companies benefit directly from higher prices, and their capital expenditure and employment decisions respond accordingly. The net impact on the US composite PMI will depend on whether energy sector gains offset the drag from manufacturing, transportation, and consumer-facing industries. That balance is genuinely uncertain, which is part of why the March data release will be so closely watched by economists trying to size the conflict's economic footprint.