Middle East conflict fuels biodiesel-driven palm oil demand

The escalating conflict in the Middle East has pushed crude oil prices sharply higher, with some benchmarks rising more than 25% and surpassing levels last seen in mid‑2022.
This spike in energy costs is reshaping the economics of alternative fuels. As crude becomes more expensive, biodiesel producers are turning to palm oil, which is currently trading at a significant discount to gasoil, making it a more cost‑effective feedstock.
Higher freight rates are also influencing buying patterns.
Asian importers, facing rising shipping costs, are seeking quicker shipments of vegetable oils, further supporting demand for palm oil. At the same time, Indonesia and Malaysia—responsible for the bulk of global supply — have seen production climb to record highs, leaving inventories elevated and prices under pressure.
The conflict has effectively reversed that trend, lifting palm oil prices to their highest in more than a year.
Policy shifts may add further momentum. Indonesia is considering reviving its B50 biodiesel mandate, a move that would significantly increase domestic consumption and tighten global supply.