Rubber Price Rally Continues as Middle East Tensions and El Niño Become Key Market Drivers

Medan, 18 May 2026 — Global natural rubber prices continued their upward trend throughout 2026 despite experiencing a sharp correction during last week’s trading. The market is currently overshadowed by a combination of Middle East geopolitical tensions, US dollar fluctuations, and growing concerns over potential production disruptions caused by the 2026 El Niño phenomenon.

Trading data for SICOM-TSR20 on SGX showed highly volatile movements throughout last week. Prices surged sharply to 231.6 US cents/kg on 13 May 2026 before reversing lower and closing at 221.3 US cents/kg on 15 May 2026.

The correction came after the market experienced a strong rally from late April through early May. Profit taking, a strengthening US dollar, and increasing market caution amid global uncertainty were the main factors behind the decline during the final two trading sessions last week.

Nevertheless, the overall trend for 2026 remains positive. Compared to early January 2026 at 181.7 US cents/kg, TSR20 prices by mid-May were still up by more than 21 percent.

Market monitoring this morning at 08:45 WIB showed the active June SICOM-TSR20 contract unchanged at 221.3 US cents/kg. Meanwhile, the most active RSS3 contract on SHFE (RU) for September rose by 40 points to 17,640 yen.

Last Week’s Weakness Considered Technically Normal

Market participants viewed the weakness during the second half of last week as technically normal following the rapid price increase seen over recent weeks.

From April through early May, TSR20 prices climbed almost without any major correction, driven by supply concerns and growing anxiety over global geopolitical conditions. This situation triggered profit taking once prices approached the psychological level of 230 US cents/kg.

In addition, the strengthening US dollar against major world currencies also pressured dollar-denominated commodities, including natural rubber.

In its May 2026 report, the Rubber Trade Association Europe (RTAE) stated that TSR20 prices had moved gradually higher over the past four months with gains of around 18 percent. However, the market also experienced several sharp corrections, particularly in late March and mid-April.

According to the association, volatility in the US dollar exchange rate during March-April was one of the main drivers behind global rubber price fluctuations.

Middle East Conflict Begins to Affect Market Sentiment

The market continues to closely monitor developments in the Middle East conflict, which is beginning to affect the global petrochemical and synthetic rubber supply chain.

RTAE noted that the war involving the US-Israel alliance and Iran since late February 2026 has not yet been fully reflected in TSR20 price charts. However, the conflict has raised concerns over the continuity of synthetic rubber feedstock supplies from the Persian Gulf region.

Logistical disruptions around the Strait of Hormuz have become a major concern because the area serves as a key route for global energy and industrial raw material distribution. Around 2,000 ships were reportedly stranded in the Persian Gulf, although most were specialized tankers.

The market believes disruptions to feedstock supplies from Gulf countries could limit global synthetic rubber production, particularly nitrile rubber. This situation may increase demand for natural rubber as a substitute alternative.

Meanwhile, synthetic rubber inventories from East Asian producers such as South Korea are still considered adequate, limiting the immediate impact on the global tire industry.

El Niño Threat Emerges as New Concern for Rubber Industry

Beyond geopolitics, the market is now paying increasing attention to the threat posed by the 2026 El Niño phenomenon to Southeast Asian rubber production.

During a webinar titled Climate Dynamics and Its Relationship with National Rubber Production organized by the Indonesian Rubber Association (GAPKINDO) on 30 April 2026, Indonesia’s Meteorology Agency through STMKG predicted that El Niño conditions could begin developing during May-June 2026 and continue through the second half of the year.

Dr. Dodo Gunawan from STMKG-BMKG explained that the probability of El Niño is expected to rise significantly from July through the end of 2026. The phenomenon could reduce rainfall across many parts of Indonesia and increase the risk of drought.

Meanwhile, rubber researcher Dr. Tri Rapani Febbiyanti stated that drought caused by El Niño could reduce latex production by up to 50 percent due to disruptions in the physiological processes of rubber trees.

Prolonged dry conditions could also trigger oxidative stress, leaf fall, tapping panel dryness (TPD), and greater vulnerability to root diseases.

However, drier weather conditions are also expected to suppress the spread of several leaf fall diseases such as Pestalotiopsis, Colletotrichum, Oidium heveae, and Corynespora cassiicola because of lower humidity levels.

As part of mitigation efforts, the GAPKINDO webinar also highlighted the importance of water conservation trenches, organic mulching, legume cover crops (LCC), irrigation, biofertilizers, mycorrhizal inoculation, and drought-tolerant rubber clones to maintain plantation productivity.

Technical Analysis: Bullish Trend Remains Dominant

Technically, TSR20 price structure still indicates a bullish trend despite sharply rising volatility over the past two weeks.

The market’s ability to remain above the psychological level of 220 US cents/kg suggests buying interest remains relatively strong. The correction following the rally to 231.6 US cents/kg is still viewed as a healthy correction within an upward trend.

Short-term support is currently seen in the 218–220 US cents/kg range. As long as prices remain above this area, the possibility of a rebound remains open.

Meanwhile, the nearest resistance lies around 225–228 US cents/kg. If this level is broken again, the market could retest the 230–232 US cents/kg area.

However, if selling pressure intensifies and prices fall below 218 US cents/kg, deeper corrections toward 212–215 US cents/kg may occur.

Weekly Outlook: Volatile With Upward Bias

For this week, rubber prices are expected to remain volatile with a limited upward bias.

Overall market sentiment remains relatively positive, supported by concerns over potential production disruptions from El Niño, risks to synthetic rubber feedstock supplies from the Middle East, and relatively stable demand prospects from the tire industry.

However, the sharp rally seen in recent weeks also increases the likelihood of further short-term profit taking, especially if the US dollar strengthens again or broader commodity markets come under pressure.

Taking into account current fundamental and technical conditions, TSR20 prices are expected to move within the range of 218–228 US cents/kg this week, with opportunities to retest the 230 US cents/kg area should supply concerns intensify further.