An epic price driver...
As the saying goes: "Wars often begin with confidence. They rarely end as imagined."
Operation Epic Fury is now entering its fourth week, and as fighting focused on energy infrastructure, the prospects for a quick end to the war in the Persian Gulf deteriorated. The near-paralysis of maritime traffic through the Strait of Hormuz and the attacks on oil and gas infrastructure, causing "the greatest disruption to petroleum supplies in the history of global petroleum markets", pose a major risk to the global economy. The main question now is how long will this last?
Meanwhile, global instability weighs on market sentiment and causes high volatility in commodity prices. Amid persistent uncertainty and sluggish economic activity, forward business remained cautiously low.
Rising prices for all petroleum-derived products, such as petrochemicals for plastics for cars, household appliances, packaging materials (for cooking oils, detergents, cosmetics, etc.), medical equipment, clothing, etc., is already impacting the economy and fueling inflation.
The agricultural sector, reliant on a stable and affordable supply of fertilizer to remain productive and affordable, is facing a fertilizer shortage that will have a direct impact on food prices. It will certainly impact cost, yields and plantings for an undetermined period of time.
A crisis can spark strategic shifts and opportunities will continue to exist. The profitability of biofuels production improved significantly, providing an incentive to comply with regulations and alleviate gasoil shortages as petroleum refineries shut down due to crude oil supply issues. But, a globally growing consumption of edible oils and fats for biofuel production, combined with a decline in consumption in price-sensitive and other food markets (e.g., a drop in exports of pre-fried frozen French fries to Middle East holiday destinations), could become a self-perpetuating cycle by driving up prices of edible oils and fats which will flow to the highest priced market.
Capital flows play a major role since the start of the war: capital moved out of equity and metals markets and into petroleum and agricultural commodities, which are perceived as undervalued. Higher petroleum prices boosted grain and oilseed prices, leading to a flood of capital into ag commodity markets and longer term, if energy prices remain high, funds may continue to invest in agricultural commodities to hedge inflation.
With the possible exception of petroleum, commodity prices are expected to remain high even after the Strait of Hormuz reopens, as time is needed to rebuild and restore supply chains. This is going to prolong and intensify the inflationary environment we already live in.
Markets
Summary of market sentiment: the only certainty is uncertainty.
Currencies
The US dollar strengthened against other major currencies since the start of the conflict in the Middle East; the conflict and rising petroleum prices drove investors toward US assets, which are considered safe havens. For now, at least, amid growing inflation fears, the war has put an end to talk about interest rate cuts and ruled out a scenario in which a stronger euro could help achieve the ECB's long-term inflation goals. The challenge for central banks is now how to respond to the new 'petroleum supply and price shock'.
Palm oil
Presently, crude palm oil prices are expected to remain above 4,450 MYR (1,130 USD)/mt. supported by high energy prices and a favorable price spread between palm oil and gasoil (POGO). A slowdown in global economic growth, sluggish demand in price-sensitive markets, increased price volatility, and historically high inventory levels could potentially curb the rise in prices. In Malaysia, export survey data showed 1.17Mmt for the first twenty days of March, a 50% increase from the previous month.
With its abundant palm oil production, Indonesia continues to develop its biodiesel industry. Twenty years ago, the country mandated a 2.5% blending rate. In 2023 they implemented the B35, in 2025 the B40 and the B50 project, scheduled for 2026, is accelerating to further reduce dependence on gasoil imports, although the implementation timeline remains uncertain.
Soybean oil
Soybean futures hit limit down last Monday after D. Trump announced the postponement of his meeting with Xi Jinping, as China showed no intention to help keep the Strait of Hormuz open. The possibility of new import tariffs was even raised. This raised concerns about China's future purchases. It is unlikely China will purchase large quantities of US soybeans until just before the postponed summit in Beijing, which President Trump later confirmed had been postponed by a month and a half.
China has shown a willingness to negotiate and to purchase agricultural products that were previously off the table, which is positive for exports. And notably, a Brazilian delegation is visiting China to address concerns regarding Brazilian soybeans, rejected from the Chinese market due to "phytosanitary objections".
Data from NOPA, showing record daily processing volumes in the US that exceeded all analyst expectations, are a sign that, although foreign demand remains uncertain, domestic crush remains a bright spot. However, more work needs to be done to help full recovery from the beating experienced on March 16th.
The longer energy prices remain high, the greater the likelihood that additional capital will shift from financial assets to physical commodities. Other supportive factors include the drought in large parts of US agricultural regions and the global fertilizer shortage, a bullish factor for arable crops, as lower fertilizer use due to limited availability or high prices typically depresses global yields.
President Trump invited farmers and biofuel producers to the White House on March 27th for a "celebration of agriculture event." This raise hopes that the long-delayed fuel blending quotas for 2026 and 2027 will be announced, providing an additional boost to demand. "Show me"!
Rapeseed oil
From palm oil to soybean oil, global vegetable oil prices have been highly volatile and short-term market unpredictability is paralyzing commercial activity. Rapeseed prices too are characterized by high volatility, and trends remain mostly dictated by energy prices. In the EU, price volatility and the still-uncertain consequences of the war in Iran prompted crushers to cautiously stay on the side which explains their subdued commercial activity.
Support for European rapeseed prices came from the recent strength in Canadian prices, which was itself driven by China's decision to drastically reduce its tariffs on rapeseed and rapeseed meal imports from Canada. But this enthusiasm was tempered by expectations of abundant supply for this and next crop year. Statistics Canada forecasts a planted area of 24.84M acres in 2026, slightly higher than the previous year. Abares raised its Australian harvest estimates for 2025/26 by 450,000 tons, to 7.7Mmt, up from 6.4Mmt a year earlier. The new Ukrainian harvest is expected to be as good as, or even better than, the previous one. In the EU, weather conditions have been favorable so far.
Legislative delays related to the implementation of the Renewable Energy Directive (RED III) in Germany kept biodiesel producers cautiously sidelining. Imported biodiesel stocks continued to weigh on the market and kept biodiesel production margins unattractive. However, a price of diesel in April, at $1,348/mt, compared to $1,300/mt for crude rapeseed oil, could lead to a quick market clean up! Furthermore, global diesel shortages could wipe out all imports of biodiesel and raw materials (such as used cooking oil). This rape oil - gasoil or ROGO spread could persist if diesel and rapeseed oil prices rise simultaneously.
The physical supply of non-GMO rapeseed oil appears to be limited in the coming months, which could keep supporting prices for food oil too. However, demand from the biodiesel industry was sluggish, as well as demand for food applications.
Sunflower seed oil
As high prices killed demand and fears of an economic slowdown or even a recession set in, the sunflower oil market adopted a more defensive stance. Prices came under pressure due to weak demand and a relatively good supply.
Sunflower oil exports from the Black Sea region have continued despite the war but demand remains generally weak, both in Europe and globally. Argentine sunflower oil continues to flow on to international markets and with more Argentine sunflower seed arriving in EU an increase in crushing activity improved oil availability. There have been reports though of Argentine seed in EU exceeding legal 'maximum residue levels' (MRL) of pesticides whereby the oil had to be kept out of the European food chain.
Overall, the market is sluggish, and buyers have very little buying appetite. Sunflower oil is expected to remain under pressure, with a growing potential for lower prices as the next harvest approaches (weather permitting of course).
Energy
Petroleum and also LNG remain a wild card for agricultural markets in general. Extreme especially upward price volatility will likely work very bullish across the board for all potential agricultural biofuel feedstocks and beyond. The petroleum and LNG market shifted quite quickly from a surplus to a structural shortage. Cases of force majeure and production cuts are multiplying rapidly and globally. Many different entire value chains (think sulfur for nickel smelters, helium for chips production, nitrogen fertilizers...) risk shortages despite the important lesson from past crises: the need to strengthen the resilience of supply chains.
Some analysts say the supply loss, caused by the war, could potentially drive crude prices as high as $150/barrel if disruptions persist; others see $200 to $250 possible.
One attack on the Ras Laffan complex in Qatar also smashed the illusion of plenty of global gas availability and exposed a structural vulnerability in the LNG supply chain. Access to energy will become a major strategic issue, if it wasn't already the top priority. The EU but also Asia will have to face a more volatile and expensive energy landscape.
Already reports emerged on Asia turning to coal for power generation, to replace the missing supply of liquefied natural gas from the Persian Gulf. And in Indonesia President Prabowo instructed to boost national coal output in response to rising energy prices (iron/nickel/stainless steel, coal, and palm oil made up 28.5% of Indonesia's non-oil and gas exports in 2025).
In the US, six trade associations, the Clean Fuels Alliance America, the American Soybean Association, National Energy & Fuels Institute (NEFI), National Oilseed Processors Association (NOPA), North American Renderers Association (NARA), and the US Canola Association, representing the full biomass-based diesel value chain, wrote a letter to President Trump, "urging him to unleash US biodiesel and renewable diesel production to bolster America's energy security during the conflict with Iran". "…/… disruption in the global oil market is constraining diesel fuel supplies, which threatens to raise the cost of all US consumer goods and further harm the US agriculture sector as farmers start this season's planting. Immediately finalizing the 2026 and 2027 Renewable Fuel Standards would encourage the US clean fuel industry to quickly ramp up enough production capacity to meet 3% of the nation's demand for diesel…/…."
In Brazil, as Truck drivers are preparing for a strike after the recent 19% jump in diesel prices due to the Middle East conflict, the biodiesel industry is pushing to quickly increase the blending mandate from B15 to B16, and they are even ready for 20%. While in the US, barges are predominant in long-distance transport of soybeans for exports, in Brazil 55% depends on trucks to reach ports.
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