Palm oil rally lifts Singapore plantation stocks amid Middle East tensions
11/03/2026 (The Straits Times), Singapore - Shares of some Singapore-listed palm oil producers have surged since the US-Israel strike on Iran began on Feb 28, as volatile oil prices lifted demand for palm oil.
Brent crude was trading at US$90 per barrel on March 11 after rising above US$100 earlier in the week.
Plantation counters such as Bumitama Agri, First Resources and Kencana Agri have rallied between 17 per cent and 46 per cent over the past two weeks, while Wilmar International, which runs oil palm plantations as part of its business, has risen by 8.8 per cent in the past week. Its shares closed on March 11 at $3.71.
Higher oil prices have lifted the price of diesel, which is derived from crude oil as a fuel source. As diesel prices rise, biodiesel has become more attractive to produce, increasing demand for palm oil as a feedstock and driving palm oil prices higher.
Data earlier this week showed the benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange rose by as much as 4.6 per cent on March 6 to RM4,567 per tonne, with trading volumes hitting their highest daily level in years.
Those gains were erased by March 11, when palm oil futures in Kuala Lumpur fell as much as 4.3 per cent, tracking a drop in crude oil prices after US President Donald Trump said the Middle East conflict could end soon.
Prices were also pressured by a proposal by the International Energy Agency to release the largest supply of emergency oil reserves in its history to offset supply disruptions linked to the war in Iran.
Still, markets remained on edge as contradictory signals from the US-Israeli war on Iran made it difficult for investors to assess the conflict’s impact on prices and growth.
Analysts at S&P Global said in a March 10 note that increased volatility in oil prices has led to biodiesel made from palm oil becoming more attractive to produce, improving profit margins for biofuel producers and potentially increasing demand for palm oil.
Early export data already suggests stronger demand. Shipments of Malaysian palm oil products for March 1 to 10 rose more than 45 per cent from the same period in February, sources told Bloomberg. Malaysia is the second-largest palm oil producer in the world after Indonesia.
Research firm Aletheia Capital said the Middle East crisis could further support palm oil prices through the biodiesel channel.
In a recent report, Aletheia Capital analyst Nirgunan Tiruchelvam raised palm oil price forecasts for 2026 to 2028 by 6 per cent to 8 per cent, citing stronger biodiesel demand and supply constraints in South-east Asia. The firm now expects palm oil prices to average about US$1,240 per tonne in 2026-2027 and US$1,390 per tonne in 2027-2028.
Mr Tiruchelvam noted that oil prices have historically risen 15 per cent to 30 per cent during Middle East conflicts.
By his estimates, every US$10 per barrel increase in Brent crude could lift palm oil prices by about 3 per cent to 6 per cent in the short term.
During the oil price spike triggered by the Russia-Ukraine war in 2022, Malaysian palm oil futures briefly exceeded RM7,000 per tonne when Brent crude climbed above US$120 a barrel, he noted.
Tighter palm oil supplies could also drive prices higher. Indonesia’s B35 mandate, which requires diesel to contain 35 per cent palm-based biodiesel, could divert roughly one-third of the country’s palm oil output for exports into domestic fuel production, for example.
Nevertheless, Aletheia raised its target prices for several Singapore-listed plantation companies, including Bumitama Agri, First Resources and Indofood Agri Resources, by 15 per cent to 25 per cent, maintaining an overweight stance on the sector.
Over the longer term, Mr Tiruchelvam noted that a recent easing of environmental, social and governance pressures on commodity sectors could continue drawing investors back to plantation stocks, which have lagged behind palm oil prices over the past decade due to investor concerns over deforestation and sustainability risks.