The ongoing tensions linked to the Strait of Hormuz and the broader Iran conflict have sparked a sharp rise in global demand for crude palm oil (CPO), boosting exports from Southeast Asia and pushing prices to their highest levels in months. Countries are rapidly building stockpiles amid fears of supply disruptions, tightening global availability.
Malaysia and Indonesia, which together account for around 85% of global palm oil production, have witnessed a strong rebound in exports. Malaysia’s CPO exports surged 41% month-on-month in March to 1.6 million metric tons, the highest since October 2025. Indonesia also reported a 36.26% year-on-year increase in exports to 4.54 million tons during January-February.
The surge is being driven not only by food demand but also by rising crude oil prices, which are increasing palm oil’s attractiveness as a biofuel feedstock. Indonesia is set to further boost domestic consumption by implementing a B50 biodiesel mandate from July 1, expected to divert 1.5 million tons of CPO away from exports.
Global trade patterns are shifting rapidly. Malaysian exports to the Middle East jumped 547.2% to 280,000 metric tons, while shipments to China rose 132.6% and to the U.S. climbed 210.5%. The European Union remained the largest buyer, accounting for 23.4% of total exports in early 2026.
Prices are already reacting to the tightening market. Malaysian palm oil futures hit their highest level since December 2024 in April. According to the Food and Agriculture Organization, the global food price index rose to 128.5 points in March, with vegetable oil prices increasing 5.1% month-on-month and 13.2% year-on-year.
However, the supply outlook remains uncertain. Fertilizer prices have surged by nearly 50% due to geopolitical disruptions, discouraging small farmers, who contribute significantly to production, from replanting. Climate change and rising temperatures are also impacting yields, with forecasts warning of a potential El Nino event in late 2026 that could reduce output by up to 14%.
Analysts caution that while demand is booming, production challenges could lead to prolonged supply constraints. With cooking oil prices expected to rise up to 20% globally, the ripple effects are likely to be felt across food markets, increasing inflationary pressures worldwide.