Hedge funds stepped up bets against manufacturing companies in June as fresh conflict around the Strait of Hormuz heightened fears of supply-chain disruption and rising input costs, according to data from Hazeltree. The dataset, compiled from 600 asset managers tracking some 16,000 global equities, identified manufacturing as the sector that attracted more short positions than any other last month.
Hazeltree's figures show that the number of manufacturing firms among hedge funds' top short targets in June rose by three compared with May. The group of manufacturing names singled out includes firms that rely heavily on imported components, with Canadian Solar, Toyota Motor and Puma among those listed.
The escalation of hostilities in the region has been linked to upward pressure on oil prices and renewed concerns about disruptions to tanker movements through the Strait of Hormuz. That heightened risk, even without a full closure of the waterway, has pushed up insurance, freight and commodity costs, factors that can erode manufacturing margins.
U.S. military actions and diplomatic developments have further intensified uncertainty. By Tuesday, the U.S. president had reimposed a naval blockade on all Iranian ports and warned of potential strikes on power plants and bridges next week unless Tehran returned to negotiations. Such developments have raised questions about whether shipping traffic can normalise after a brief easing of tensions had previously helped lower commodity prices and lift manufacturing stocks.
Analysts cited in the Hazeltree release described the implications for manufacturers as significant because many are economically sensitive and face the prospect of rising costs that may be difficult to pass through to customers. "If the Iran war isn’t resolved soon, there is a clear risk of global economic disruption, which is bad news for manufacturing companies given they are economically sensitive," Daniel Coatsworth, head of markets at AJ Bell, said.
Other commentators pointed to the knock-on effects for freight rates and the broader shipping industry. "Other potential risks to manufacturing profit margins are greater transportation costs if shipping-route disruption leads to higher freight rates which then spreads across the shipping industry," Coatsworth added.
Trading patterns through the strait underscore the sensitivity of global trade flows to the conflict. Before hostilities began on February 28, roughly 90 to 110 vessels transited the waterway each day, according to LSEG data cited in the Hazeltree materials. At the peak of disruption, transit volumes collapsed by more than 90%.
Senior equity analysts highlighted that the strain on logistics is not limited to routes passing near the Middle East. "In terms of things like freight rates, even those routes which don’t really go near the Middle East ... you’re seeing sort of supply chain stress," Andrew Simms of Berenberg said, noting that freight rates on the Shanghai-to-Los Angeles corridor have more than doubled in recent months.
Hazeltree's sector classifications assign firms to manufacturing when their primary economic activity involves the mechanical, physical or chemical transformation of materials, substances or components into new products. The dataset and accompanying analysis suggest that hedge funds are betting that renewed geopolitical risk and the attendant cost pressures will weigh disproportionately on such businesses in the near term.
The companies named in the Hazeltree reporting did not immediately provide responses to requests for comment.
Summary
Hazeltree data shows hedge funds increased short positions in manufacturing stocks in June, driven by concerns that renewed tensions around the Strait of Hormuz will elevate oil, insurance and freight costs and disrupt supply chains. Manufacturing accounted for more hedge fund short targets than any other sector, with Canadian Solar, Toyota and Puma among the firms highlighted. Shipping flows through the strait fell sharply at the height of the conflict, and freight rates on major routes have risen materially.