According to the latest assessment by the World Meteorological Organization (WMO), the weather phenomenon is increasingly likely to persist into 2027, raising concerns about agricultural output, food prices and inflation across several economies. The WMO put the chance of an El Niño developing over June to August at 80%, rising to around 90% through November, with most models pointing to at least a moderate event and the possibility of a strong one. The U.S. National Oceanic and Atmospheric Administration (NOAA) has confirmed El Niño conditions, with various analysts estimating around a two-thirds probability that a very strong or 'super' El Niño could develop in 2026. The ratings agency warned that the formation of an El Niño weather phenomenon that is set to persist into early 2027 raises the risk of economic disruption in a range of sovereigns. The latest projections from the US Climate Prediction Center suggest a 96% probability that El Niño will continue through the December 2026-February 2027 period, as noted by Fitch Ratings. However, Schroders analysis suggests the current El Niño could be particularly severe, describing it as a 'super El Niño' that could fuel another wave of global food inflation. The WMO notes that El Niño's effect on global temperature is usually strongest in the second year, so the heaviest consequences of a 2026 event may land in 2027.
The concern extends beyond weather patterns to existing economic pressures and potential price impacts. Risilience chairman Andrew Coburn's analysis published by Reuters reveals possible price shocks at 10% to 50% across core commodities, with the most exposed crops, including rice, palm oil, sugar, and coffee, potentially rising 50% to 100% or more. The analysis warns that government responses can amplify the move, as large rice exporters such as India, Vietnam, and Thailand have restricted shipments during past shortages to protect domestic supply. The concern is particularly acute because the world depends on a short list of staple food crops for most of its calories, and when a single climate pattern causes losses across several continents at once, there are fewer healthy harvests elsewhere to fill the gap. Higher-value cash crops such as coffee, sugar, and palm oil sit in some of the most exposed regions, which is why they often react first when climate patterns change. Fitch Ratings notes that global crop yields are already facing uncertainty because fertiliser prices have risen amid supply disruptions linked to the ongoing US-Iran conflict, and a prolonged El Niño event could further tighten food supplies and increase pressure on globally traded agricultural commodities. Recent market data shows cocoa futures roughly doubled during 2024 as West African output fell, with prices briefly pushing above US$10,000 a metric tonne and trading above some industrial metals - a price shock that fed directly into global confectionery margins and consumer prices for chocolate.
The latest analysis reveals specific vulnerabilities across key agricultural commodities. Cocoa remains the clearest example of how El Niño commodities can transmit regional weather shocks into global food prices, with past strong El Niño events often associated with reduced cocoa output. During the 2023-24 El Niño, West Africa — with Ivory Coast and Ghana together producing well over half of the world's cocoa — first faced rainfall at roughly twice normal levels, which drove a wave of fungal disease in already stressed trees. The pattern then flipped in 2024, with intense heat and strong, dry Harmattan winds causing disease-weakened trees to shed flowers and sharply curbing the subsequent harvest. Robusta coffee presents parallel vulnerability, with El Niño typically bringing higher temperatures and reduced rainfall to top producers Vietnam and Indonesia from mid-year onwards - a period critical for crop development. Together, Vietnam and Indonesia supply roughly half of global robusta output, so any sustained dryness can meaningfully tighten the segment's balance. Citi Research has warned that El Niño-linked dryness in key Asian producers could significantly trim robusta yields, with the impact likely felt from the fourth quarter as harvests come in. Arabica's exposure is more nuanced, with around 40% of global production coming from Brazil, where El Niño can initially help the crop by reducing the risk of damaging winter frosts, but brings hotter, drier conditions in the fourth quarter that can curb output in the following year. The impact is already being felt across various regions, from a delayed start to the Indian monsoon to a temporary halt to Peru's fishing season, with the last time the world faced such a strong El Niño in 2015 and 2016, the result was more than $7.8 trillion in lost productivity based on a Dartmouth College study.
As concerns over the Iran conflict recede, stock investors are confronting climate risk, prompting a reassessment of bets across sectors from agriculture to insurance. A high probability of a 'Super El Niño' heading into 2027 may drive up temperatures in some parts of the world, sending power demand surging, hurting crop yields and reigniting inflationary pressures. According to Saxo Bank, 'El Niño arrives at an especially sensitive moment' as the global economy is still adjusting to the inflationary consequences of the Iran conflict, while supply chains remain vulnerable following months of disruption. Agriculture and aquaculture sectors are likely to bear the brunt of a stronger El Niño, though the impact will vary across regions and commodities. In Indonesia, the world's largest palm oil producer, hotter and drier weather typically reduces yields, clouding the outlook for plantation earnings and adding pressure to local stocks already weighed down by concerns over Indonesia's market-classification status and move to centralize key commodity shipments. Global production of corn and wheat may also be negatively affected by the weather phenomenon, according to UBS Group AG, as well as sugar output in Asia. India, the world's second-largest sugar producer, has banned exports until the end of September, dragging shares of millers such as Shree Renuka Sugars Ltd. and Bajaj Hindusthan Sugar Ltd. Meanwhile, improved rainfall in Argentina and higher sugar prices may benefit some Latin American firms including São Martinho and Adecoagro SA, according to Morgan Stanley. Fertiliser firms could be among the biggest beneficiaries of El Niño if the weather pattern tightens global crop supplies, with nitrogen fertilizer stocks like CF Industries Holdings Inc. and Nutrien Ltd. set to benefit. Energy sectors face mixed impacts, with higher temperatures potentially boosting air-conditioning use in Asia and straining power grids when energy prices are already elevated, while heavier rainfall in South America can disrupt transportation networks and potentially affect mining operations, including copper production in Chile and Peru. Economic Times reports that copper miners with operations in Chile and Peru may come in focus, including Freeport-McMoRan Inc. and Anglo American Plc, while Chinese power firms have made strong gains this year, with Jinneng Holding Shanxi Electric Power Co. rising 64%.
The hurricane-weakening effects of El Niño may create opportunities for some sectors while posing risks to others. The hurricane-weakening effects of El Niño may be positive for property and casualty insurers in the Northern Hemisphere, potentially helping insurers in hurricane-prone regions like Florida. This potentially helps insurers in hurricane prone regions like Florida, said Bloomberg Intelligence analyst Matthew Palazola, noting that that market is dominated by private mutuals and smaller regionals, though Allstate is a large public carrier in the state. Piper Sandler & Co.'s Paul Newsome reiterated benefits for insurance firms, saying 'most US based insurers will benefit from lower claim expense because US hurricanes are a major source of claim costs', with companies such as Allstate Corp., Progressive Corp., and Travelers likely to benefit. However, the broader financial sector outlook may be less straightforward, with banks exposed to weather-sensitive industries likely to take a hit. JPMorgan Chase & Co. analysts including Yuri Fernandes see negative impacts for Peruvian lenders, given the weather pattern's ability to disrupt loans tied to fishing and agriculture activity. The bank downgraded shares of Credicorp Ltd. and Intercorp Financial Services on El Niño headwinds and political-transition noise tied to Peru's election. Micro lenders in India, including Bandhan Bank Ltd., may also be affected as a weaker monsoon may reduce crop output and farm earnings, with the impact already being felt across various regions from delayed monsoon starts to temporary halts in fishing activities.
The impact of El Niño is being compounded by accelerating climate change, creating a perfect storm for global food security. Scientists declared in the annual Indicators of Global Climate Change that our climate is heating at an all-time high of around 0.27°C per decade, driven primarily by record-high greenhouse gas levels, mainly from the burning of fossil fuels. They added that there are around three years remaining of the 1.5°C carbon budget and the 1.5°C temperature threshold could be exceeded on a longer-term basis by 2030 as the Earth is getting hotter, faster. This means that in the short-term an El Niño will likely lead to another spike in global temperatures and on a longer-term basis, human-induced global warming is worsening and progressively destabilising our Earth systems. The confirmation of an El Niño came as scientists warned that the first since 2016 could become one of the strongest ever recorded and temporarily push the average global temperature above the 1.5°C limit adopted in the Paris Agreement. The WMO decadal outlook gives an 86% chance that at least one year in 2026 to 2030 sets a new annual temperature record, and a 91% chance that at least one year passes 1.5°C above the pre-industrial level.
