Weak demand from Iran puts pressure on palm oil sector – expert

Palm oil is among the sectors hardest hit by ongoing geopolitical tensions in the Middle East, primarily due to weakening demand from Iran, said Datuk Seri Rizal Merican Naina Merican, Chairman of the Malaysia External Trade Development Corporation (Matrade).

During a media briefing on Tuesday, he reported that palm oil and palm oil-based product exports to Iran fell 86.1% year-on-year to RM90 million in the first quarter of 2026. Palm oil and palm oil-based products accounted for 62.4% of Malaysia’s total exports to Iran during this period.

Besides palm oil, Rizal Merican noted that petroleum product and agricultural exports have also been affected by the ongoing tensions. He added that disruptions in fertilizer supplies—an estimated 30% of global supply comes from the Middle East—are impacting the agricultural sector.

Trade with West Asia fell by 30.4% in the first quarter, while exports declined by 23.6%, reflecting lower shipments of palm oil, petroleum products, and electrical goods.

However, the direct impact is limited, as this region accounts for only 2.7% of Malaysia’s total trade. This was also offset by stronger export growth to non-conflict markets in Africa, Latin America, and Central Asia, said Rizal Merican.

Nevertheless, he emphasized that the conflict deserves close attention, as indirect effects such as higher commodity prices, transportation costs, and war risk premiums could weaken export competitiveness and worsen overall trade performance.

“Our monitoring, combined with industry analytics, shows that the ‘dual pressure’ of logistics disruptions and raw material availability is impacting the business environment. This renewed cost pressure has led to an increase in overall operating expenses of 10-30% in more than half of our businesses,” explained Rizal Merican. Matrade Expands Mitigation Efforts to Support Exporters

In response to these challenges, he said, Matrade is increasing its mitigation efforts by leveraging its global network of overseas offices as “forward intelligence collection centers” and expanding its presence in non-conflict markets.

“First, we are leveraging our extensive global network by repurposing our 47 overseas offices into ‘forward intelligence collection centers.’ These offices are no longer simply promotion centers; they now act as our eyes and ears on the ground, collecting data in real time.

We are also focusing on non-conflict markets to expand access and exploit new opportunities,” he noted.

Rizal Merican also emphasized that trade representatives have been given an urgent mandate to monitor and facilitate trade flows on a daily basis, providing exporters with real-time information on port connectivity and potential disruptions before they become critical bottlenecks.

Trade representatives determine tactical solutions, providing regular updates on how exporters can reroute cargo to stable regional hubs and ports, such as Salalah or Sohar in Oman, and explore alternative land and rail routes to bypass maritime bottlenecks.

“Under the revised terms of reference, the role of trade representatives has expanded to focus on new export opportunities arising from geopolitical tensions, while positioning Malaysia as an alternative sourcing option.” “They are actively identifying emerging supply shortages and seeking alternative raw materials globally to support Malaysian industry in maintaining production in the face of disruption to some traditional supply chains,” he added.

Tags: prices, palm oil