InfoSAWIT, JAKARTA – Escalating geopolitical tensions in the Middle East have become a major catalyst for higher crude palm oil (CPO) prices, while simultaneously increasing logistics costs, production expenses, and uncertainty across the global palm oil supply chain.
The palm oil market is increasingly being shaped not only by weather patterns or seasonal harvest cycles but also by geopolitical developments affecting energy markets and international shipping routes. As conflict intensifies, palm oil has emerged as a commodity closely linked to global energy security and trade dynamics.
According to Andrial Saputra, Head of Exchange and Business Development, the escalation of conflict during the first quarter of 2026 sent shockwaves through both international and domestic palm oil markets.
"The impact is tangible and measurable. It has significantly altered market calculations," Andrial told InfoSAWIT.
Palm oil futures on the Bursa Malaysia Derivatives Exchange (BMD) climbed to RM4,631 per metric ton by the end of March, representing an increase of approximately 14.6%. Meanwhile, Indonesia's domestic KPBN reference price, which had previously remained below Rp15,000 per kilogram, surged to Rp16,275/kg, marking the highest level recorded this year.
The rally reflects mounting concerns over disruptions to two critical pillars of global trade—energy and logistics.
One of the key factors is the growing threat to the Strait of Hormuz, a strategic waterway through which roughly 20 percent of the world's crude oil shipments pass. Rising global oil prices have increased industrial energy costs while simultaneously making palm oil-based biodiesel more economically attractive.
At the same time, security risks in the Red Sea and the Bab el-Mandeb Strait have forced commercial vessels to reroute, extending voyage times and sharply increasing freight expenses.
"The consequences are substantial. Shipping costs are estimated to have increased by between 50 and 65 percent, excluding higher marine insurance premiums. While palm oil benefits from stronger prices, the industry also faces significantly heavier distribution costs," Andrial explained.
The situation underscores how geopolitical conflicts far from Southeast Asia can rapidly influence the economics of one of the world's most important vegetable oils. Although elevated CPO prices have supported producer revenues, higher transportation costs and increased market volatility continue to pose significant challenges for exporters, refiners, and downstream industries.
As global markets closely watch developments in the Middle East, palm oil traders remain focused on balancing stronger demand prospects against mounting operational risks that could reshape trade flows in the months ahead. (T2)
For the complete report, see the May 2026 edition of InfoSAWIT Magazine
