The war in Iran has caused a sharp increase in logistics costs for exporting palm oil from Indonesia. According to the Indonesian Palm Oil Producers Association (GAPKI), transport and insurance costs for exporters have risen by about 50%, which could negatively affect global demand.
The situation escalated at the end of February following U.S. and Israeli attacks on Tehran, intensifying tensions in the region and disrupting shipping through the Strait of Hormuz — a key maritime trade route. Due to the risks for shipping, some vessels have been forced to take alternative routes, lengthening delivery times and increasing insurance costs.
Despite the challenging conditions, Indonesia continues to supply palm oil to foreign markets, mainly fulfilling existing contracts. Meanwhile, some importers are holding off on signing new deals, waiting to see how the situation in the Middle East develops.
According to the association, last year Middle Eastern countries imported around 1.8 million tons of Indonesian palm oil. The largest buyers were Saudi Arabia, United Arab Emirates, and Oman, although shipments to some destinations are currently constrained due to difficulties navigating the Strait of Hormuz.
Indonesia, the world’s largest palm oil producer, relies heavily on this crop to maintain a positive trade balance. The government has stated that the impact of the conflict on exports will depend on how long the fighting continues in the region.
