Kuala Lumpur (VNA) – The ongoing conflict in the Middle East is casting a shadow over Malaysia's plantation sector, driving up costs and potential demand disruption.
RHB Research analyst Hoe Lee Leng said the geopolitical tensions have created a "multi-faceted impact" on the industry. While higher crude oil prices have pushed crude palm oil (CPO) prices up 11.6% since the conflict began, narrowing the palm oil-gasoil (POGO) spread and potentially supporting Indonesia's B50 biodiesel mandate, the negative ramifications are more concerning.
Hoe said shipping route closures near the conflict zone threaten demand from countries such as Pakistan, Egypt, Saudi Arabia, Turkey, the United Arab Emirates and Iran, potentially affecting up to 15% of global palm oil consumption.
She added that the conflict is disrupting supply chains, with fertiliser and logistics costs expected to rise sharply. The Strait of Hormuz, a critical chokepoint for roughly one-third of the world's fertiliser trade, is at risk, potentially impacting global edible oil production.
Global freight costs have risen to all-time highs, while insurance companies are preparing for the possible activation of “notice of cancellation” provisions in war-risk policies and for sharp spikes in war-risk premiums.
All this could add to higher overall costs for palm oil. Fertiliser costs currently comprise about 20–30% of total palm oil production costs, while transport and logistics costs account for around 5–10%, Hoe said.
However, RHB noted that if the conflict stabilises or ends, CPO prices could fall rapidly, similar to the 2022 pattern following the Russia–Ukraine conflict, when prices initially spiked before dropping 59% from their peak.
Malaysian palm oil stocks are projected to fall 8% month-on-month to 2.48 million tonnes in March 2026, while production is expected to increase 12% to 1.44 million tonnes./.
