• Palm oil futures in Malaysia surged 9%, their biggest one-day gain in three years.
• The spike follows rising oil prices after escalating tensions in the Middle East.
• Higher crude prices could boost biodiesel demand and support palm oil markets.

Benchmark palm oil contracts for May delivery on the Bursa Malaysia Derivatives Exchange rose 9% at the open on March 9 reaching 4,774 ringgit ($1,204) per ton. The increase marks the largest daily gain in three years.

The surge follows a 3.7% rise recorded last Friday and comes amid escalating military tensions involving Iran, Israel, and the United States.

The crisis, now in its tenth day, has led to the closure of the Strait of Hormuz and pushed oil prices above $100 per barrel on Monday. Several Middle Eastern producers, including Iraq and Kuwait, have also announced output cuts as storage facilities fill rapidly.

Higher crude prices tend to improve the competitiveness of vegetable oils such as palm oil as feedstock for biodiesel production compared with conventional petroleum-based fuels.

According to data reported by analytics firm Platts, the price spread between palm oil on Bursa Malaysia and gasoil traded in Singapore had narrowed to $177.96 per ton as of Friday, March 6—about 44% lower than a year earlier. In 2025, the average spread stood around $328.45 per ton, significantly wider than current levels.

Such reactions in the palm oil market are common when crude prices become volatile. If the geopolitical crisis persists, it could support palm oil prices this year.

In 2025, market expectations for a strong rebound had faded after palm oil prices fell 9% on Bursa Malaysia, ending the year at 4,050 ringgit per ton despite a 20% increase in 2024.

The market had anticipated stronger demand from biofuel policies in Indonesia. However, those expectations cooled after the country abandoned plans to introduce a mandatory B50 biodiesel blend this year due to technical and financing constraints. Instead, Indonesia confirmed that the B40 mandate—requiring diesel to contain 40% palm-based biodiesel—will remain in place.

While it is still unclear whether tensions in the Middle East could lead the government to reconsider the B50 mandate, the geopolitical situation adds to an already uncertain outlook for palm oil markets.

Indonesia also raised export levies and taxes on palm oil on March 1, increasing the combined charge from $165.85 to $241.36 per ton, according to Platts. Higher export costs could encourage producers to redirect volumes toward domestic uses such as refining and biodiesel, reducing supplies available for export.

Analysts will also watch India’s import data in the coming weeks. In the world’s most populous country, purchases by refiners rose 10.1% in February to 844,000 tons, the highest level in six months.

However, stronger palm oil prices could dampen demand and shift interest toward its main rival, soybean oil, whose exports could benefit from abundant global supply.

Espoir Olodo