Torn between hope and fear.

As always, there is a lot going on, but little to encourage confidence. Markets stay focused on developments in the Persian Gulf and the Gulf of Oman, hoping for an end to the conflict and a resumption of trade.

Most markets fluctuated in response to conflicting signals from the US and Iran, as they hoped the fragile ceasefire between the two countries will hold. At the same time petroleum remained the key macroeconomic factor influencing our markets.

Behind the scenes, negotiations appear to be underway, in which China also seems to be involved. Ahead of the China-US summit scheduled for this coming Thursday and Friday, China, needing the global economy to recover, hosted a senior Iranian diplomat. 

However, caution is still advised. The crisis could drag on. A return to normal is not expected overnight, and markets keep contemplating about "the day after": will it be a gradual reopening, a prolonged disruption, or a permanent shutdown? And lots of details need to be clarified before anyone would consider sending merchant ships to the region. Meanwhile the overall maritime security situation remains dangerously unchanged. 

In times of widespread uncertainty, markets constantly swing between hope and fear. Two inseparable emotions; hope cannot exist without fear, nor can fear exist without hope. This often leads to inertia and is why the market seeks to free itself from both.

Markets

Petroleum

Currencies and Economy

Speculators seem more bearish on the value of the US dollar as prospects for a 'peace' agreement between the US and Iran improved. Peace would, economically, be more favorable to major currencies than to the USD, as the war has been more damaging to the world's major economies than to the US economy. Mid-April, Kenneth Rogoff, a Harvard University professor, said he believed the USD was 15 to 20% overvalued and at risk of a correction while some banks are forecasting a USD of 1.20 against the euro for 2026. The outcome of the debate around policy interest rates and inflation could still interfere of course. But a weaker USD makes American products more price-competitive in global markets.

Particularly Asian economies were hit hard by the energy supply shock. Petroleum imports crashed and replacement barrels from the US and Russia are far from enough to fill the gap, fueling inflation and slowing growth. There is an increasing risk of a collapse in demand, weak consumption, and a widespread economic slowdown in the region. If the conflict drags on, a collapse in demand will unavoidably happen as prices become unaffordable for a growing number of consumers. And falling consumption means a contracting economy.

Central bankers increasingly focus on runaway inflation, stagnation and recession as consequence of the energy crisis and recently, the ECB became the first central bank to openly say fears for a recession are justified. The Chinese economy too is threatened by global consumer caution, which is beginning to weigh heavily on the Chinese export driven economy.

Palm oil

A story of hope that kept coming back was that India is expected to ramp up its purchases in the coming months to replenish its stocks if prices fall. However, India has been reducing its vegetable oil imports due to the conflict in Iran, which is driving up prices and causing fuel shortages. Demand for vegetable oil is expected to decline due to a slowdown in the food service sector, with domestic edible oil prices rising too high relative to purchasing power. A sustained destruction of demand could become challenging for edible oils and fats producers and exporters. After imports fell 19% month-on-month in March, to their lowest level in three months, concerns about demand intensified, with imports plummeting 27% month-on-month in April, to their lowest level in a year.

Higher petroleum prices though have reinforced forecasts of increased demand for biofuels. Malaysia and Indonesia, the world's largest producers of palm oil, accounting for more than 80% of global production, have both decided to increase the proportion of palm oil in diesel fuel due to fuel shortages caused by the Middle East conflict. Indonesia will raise the minimum required percentage of palm oil in diesel from 40% to 50% starting July 1st, which would require an additional 3Mmt of palm oil per year. Malaysia has decided to raise the required minimum of palm oil that diesel must contain from 10 to 15% starting June 1st (to increase to 50% over the next two years). Initially, this means that an additional 300,000 mt of palm oil per year will be removed from the market. These policies reduce the availability of palm oil for export and other uses.

Late April, In Indonesia, the world's leading producer of palm oil (51.7Mmt in 2025 according to the national palm oil producers' association GAPKI), the GAPKI president said that Indonesian crude palm oil production could fall by 2Mmt this year due to an El Niño linked drought and rising fertilizer prices caused by the war in Iran. Producers may reduce or postpone fertilizer use and the country's meteorological services warned for an increasing risk of a longer and more severe dry season in 2026.

The Malaysian Palm Oil Council expects prices to remain above 4,500 MYR, supported by higher energy prices and potential supply cuts related to the El Niño weather phenomenon. The market structure stays in a carry indicating there is a lot of stock to carry and the April production, export and end-of month-stocks figures for Malaysia should be out this Monday at noon and provide further guidance.

Soybean oil

Oilseed prices fell slightly early last week following the drop in oil prices, but remain high, driven mainly by demand for biofuels and, in the US, by the prospect of the meeting between Xi Jinping and Donald Trump and anticipation that new purchases of soybeans, as well as other agricultural products, will be announced at the summit.

In Chicago, soybean oil futures continued to climb, but soybean prices have been more or less stagnant for over a month and the breakout from the trading range, seen since mid-March, was short-lived. Last Friday, beans firmed ahead of the U.S.-China summit scheduled for this coming Thursday and Friday and now it's up to Trump. If he fails to secure purchases from China, fears of a further decline in demand could quickly rock the market.

Bountiful harvests in South America are limiting upside potential, while in the US, planting has gotten off to a flying start, with more than 33% of the crop already planted and favorable weather conditions continuing to support forecasts of an increase in soybean acreage.

New clashes in the Strait of Hormuz could reignite fears of prolonged disruptions to energy supplies, leading to higher energy prices and increased demand for biofuel feedstocks, such as soybean oil. In any case, fuel prices are expected to remain high in the short to mid-term, which should support biofuel production.

Rapeseed oil

Rapeseed prices have risen significantly in a market that remains primarily driven by soaring petroleum prices with demand for vegetable oils used in biodiesel production growing in EU, North and South America, and Southeast Asia.

A breakdown in negotiations between Tehran and Washington, which had pushed Brent way above $100/barrel and further fueled global demand for oilseeds, turned the tide with the resumption of negotiations and the desire of US to reduce tensions, causing petroleum prices to correct. But there is no agreement yet.

Imports into EU of rapeseed from Canada and Australia remain high, and since the start of the season contributed to ample supplies, despite good demand for rapeseed and rapeseed meal in the UK and Northern EU. There is some domestic selling pressure, while demand from oilseed processors, opting for a wait-and-see approach, remains subdued. 

In Canada, where improving weather conditions are boosting confidence that crops can be planted under favorable conditions, farmers focus on their spring planting season. 

Prospects for a bigger sunflower harvest this year could have a mitigating effect on rapeseed oil prices. On the other hand, continued strong demand from the biofuel sector (in America and EU) could support price levels.

Sunflower seed oil

Old crop sunflower oil prices are expected to remain relatively stable in the second and third quarters, as stocks from the previous harvest decline. And there is also a growing concern about deteriorating processing and export capabilities of Ukraine due to "war damage" to logistic and electrical power infrastructure.

But improving weather conditions across EU support the forecast of a bumper sunflower production this year. After the big price increases seen in 2025, due to the poor harvest in Ukraine, the situation should improve in the fourth quarter. Record planted areas in Ukraine, France, Romania and other producing countries should lead to abundant crops and if all this materializes, the market should expect downward price corrections for deferred positions.

The focus is now on plantings and sellers as well as buyers remain in hesitation mode which resulted in subdued commercial activity.

Olive oil

This season, Spanish olive oil production is seen at a good 1.3Mmt. But availability of 'good quality virgin olive oil' remains limited. The current flowering season is exceptionally good and may point to a record harvest ahead. However, there are still several months to go before the new production hits the market in November, and the weather remains unpredictable.

This year, Tunisia is the second-largest producer, with an olive oil production of about 500,000 tons, doubling its 10-year-average production. Next comes Italy, just under 300,000 tons, Greece, just over 200,000 tons, and Portugal, with 170,000 tons, all at average levels.

Prices for good-quality olive oil from the previous harvest are expected to remain stable to firm but if the current harvest in Spain continues to develop under favorable conditions, prices may fall in the fall.

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