Arab Conflict Unresolved: Palm Oil Boss Warns of Dire Economic Impact
The Indonesian Government views the geopolitical conflict in the Middle East as potentially beneficial to Indonesia through rising commodity export prices. However, palm oil industry players caution that behind these opportunities lie significant risks, including declining demand stemming from soaring global logistics costs.
Crude palm oil (CPO) prices have indeed risen 14 percent year to date to US$1,110.47 per ton. However, compared with the same period last year, prices remain contracted by 2.8 percent.
Meanwhile, palm oil industry actors recognise that geopolitical conflict also presents distinct challenges to global trade. Eddy Martono, chairman general of the Indonesian Palm Oil Producers Association (Gapki), stated that the uncertainty surrounding the war could potentially suppress demand because logistics costs have increased sharply.
“If the war drags on indefinitely, demand will certainly fall. Why is that? Because importers will also think that if costs rise, those costs now cover transport,” Eddy told CNBC Indonesia when met in Jakarta on Thursday, 12 March 2026.
He explained that export shipping costs for palm oil have already surged significantly. In several instances, shipping routes must be rerouted, further increasing logistics costs.
“For palm oil, our average cost increase is 50 percent. The cost for freight and insurance. There are even other additional costs, but I won’t mention them. It’s actually more than that, if routes have to be diverted,” he said.
According to Eddy, such cost increases could prompt importing countries to reduce their purchases.
“So they may end up reducing their purchases,” he noted.
In light of these conditions, palm oil industry players have begun preparing various anticipatory measures to ensure the impact does not match what was experienced in 2022.
Hadi Sugeng Wahyudiono, secretary general of Gapki, stated that palm oil companies are now focusing on internal efficiency whilst monitoring global developments.
“What Gapki is doing in relation to this conflict is primarily to increase our efficiency. We are also drawing up scenarios within each company’s internal operations. Whatever can be streamlined, we streamline it,” Sugeng said on the same occasion.
He noted that palm oil industry players can only adapt to the various global impacts currently occurring.
“Since we cannot reject global impacts when they occur, we must accept them. So in principle, we focus on putting our house in order. We also continue to wait and see how developments unfold. That is all,” he concluded.