Palm oil futures plunged 2.4% to near 4,500 ringgit a ton in Kuala Lumpur, marking the steepest decline in over a month. The drop tracked broader commodity weakness as Brent crude surrendered wartime gains following progress toward a US-Iran peace agreement. Soy oil in Chicago slipped 0.6%, pressuring vegetable oil markets broadly.

A strengthening Malaysian ringgit compounded the selling pressure, making exports from the world's second-largest producer more expensive. David Ng, senior trader at Iceberg X Sdn, noted that falling oil and gas prices reduce biofuel competitiveness, potentially curtailing demand for palm oil feedstocks. However, Indonesia's expanded palm-based biodiesel mandate launching next week could shift sentiment.

Malaysia's palm oil output rose 4.8% in early June versus the prior month, according to industry estimates. Gnanasekar Thiagarajan of Kaleesuwari Intercontinental Ltd said production increases while overseas demand remains weak, limiting upside potential. The vegetable oil requires positive fundamental triggers to break higher, traders said.

The price correction reflects broader energy market repricing as geopolitical tensions ease. With biofuel margins under pressure and currency headwinds persisting, palm oil faces near-term resistance despite upcoming policy support from Indonesia's biodiesel expansion.