Global Services PMI Diverges in May 2025: US and Asia Expand as Europe and UK Contract Under Energy Shock

The global J.P.Morgan Global Services PMI registered 52.0, up from 50.8, signalling an overall expansion that masked the severe weakness concentrated in Europe . The J.P.Morgan Global Composite PMI Output Index, which covers both manufacturing and services, posted 51.2 in May .

How the Middle East Conflict Created an Asymmetric Energy Shock

The conflict, a war involving Iran, effectively closed the Strait of Hormuz, a critical global chokepoint. According to the IMF, about 25–30% of global oil and 20% of liquefied natural gas passes through the strait . The International Energy Agency described the disruption as the largest to the global oil market in history . This translated into a "war-driven surge in living costs" that hit fuel-importing economies hardest and most immediately .

Europe and the UK: The Epicenter of the Downturn

Europe and the UK were disproportionately affected due to their heavy reliance on imported energy. The economic impact was both swift and severe.

In the eurozone, economic activity shrank at its fastest pace in over two-and-a-half years . Cost pressures rose sharply across the bloc, with France, Germany, and Spain identified as the hardest-hit economies . The surge in living costs directly "hammered demand for services across Europe and firms accelerated layoffs" .

The UK suffered the steepest rise in input costs among advanced economies, widely linked to the war's impact on energy and shipping prices . This fed directly into a contraction in its massive services sector. The S&P Global UK Services PMI fell from a modestly growing 52.7 in April to a contracting 49.3 in May, the first below-50 reading in a year . Survey respondents noted that concerns about the Middle East conflict had led to "deferred spending decisions and reduced discretionary spending," with hospitality and travel businesses feeling the impact acutely .

The United States: Energy Independence Provides a Buffer

In stark contrast, the U.S. economy demonstrated notable resilience. As a net energy producer, the country was significantly less exposed to disruptions in Hormuz shipping than its European peers. While input cost inflation did rise, the services sector not only avoided contraction but expanded at a solid pace (53.7). The broader S&P Global US Composite PMI was revised up to 53.0, a level consistent with healthy private sector growth .

Asia: Growth Maintains Momentum Despite Higher Import Bills

Asia presented a more mixed but broadly expansionary picture. While large Asian economies are significant energy importers and felt the impact of higher fuel costs, this was largely offset by powerful domestic demand and, in some cases, booming export services.

India's services sector accelerated sharply, with its HSBC Flash India Composite Output Index rising to 61.2, the strongest month-on-month growth since April 2024, driven by high domestic and international demand . China's services expanded at a faster pace driven by internal new orders, which offset a minor decline in new export business caused by separate US tariff-related uncertainties . The energy cost increase was a headwind for the region, but not a decisive drag as it was in Europe .

The data from May 2025 illustrates how a single geopolitical shock can produce a highly fragmented global economic outcome. The divergence was not random; it was a direct function of energy dependence. Europe's economic engine stalled as a war-fueled jump in energy prices cascaded into higher living costs and crushed discretionary services spending. The United States was insulated by its domestic energy production, while Asian economies navigated the shock with strong underlying growth dynamics.