The benchmark palm oil contract FCPOc3 on the Bursa Malaysia Derivatives Exchange fell 1.34% to RM4,647 at the midday break on Wednesday, though it is up about 15% since the war began in late February.

Palm oil futures are expected to extend gains to around RM5,000 by June and potentially reach RM5,200 by mid-July on biodiesel demand, said Mistry, the director of Indian consumer goods company Godrej International.

One of the most closely watched analysts of edible oils, Mistry’s forecasts for supply and prices often move markets.

Global oil prices hit a four-year high of more than US$126 a barrel last week. This rally has made the use of vegetable oils for biofuel production more attractive.

Refined fuels like diesel and gasoline rose more sharply than crude after the Iran war began, Mistry said.

As a result, the spread between fossil diesel and palm biodiesel narrowed, cutting subsidy requirements and – in some markets – making palm biodiesel cheaper than fossil diesel, he said.

“Rising energy prices prompted Indonesia to reinstate its B50 palm biodiesel programme from 1 July 2026,” Mistry said. “Biodiesel mandates are being increased in other countries like Malaysia, Thailand and others too.”

Indonesia, the world’s biggest palm oil producer, said it would raise the mandatory blending rate for palm-based biodiesel to 50% from 40% on July 1.

Palm oil competes with soyoil, which has rallied in recent weeks as top producers – the US, Brazil and Argentina – increase its use for biofuels.

“The US has announced its long-awaited jumbo biodiesel programme for 2026 and 2027, which has, as expected, lit a fuse under soybean oil futures,” Mistry said.

Higher edible oil prices are leading to demand destruction in key consuming countries like India, where stocks have fallen and imports will need to be stepped up from June, he said.