Super El Niño

While inflation, tariffs and geopolitics continue to dominate headlines, another risk emerging for the global economy is the development of a potential “Super El Niño”. El Niño events occur when Pacific Ocean temperatures rise above normal, disrupting weather patterns across the globe. What makes this year’s event unusual is its expected strength. Forecasts suggest there is more than an 80% chance it becomes a “very strong” El Niño, placing it among the most powerful events since records began in 1950. Events of this magnitude are often referred to as “Super El Niños” due to their outsized impact on global weather patterns.

The effects are already being felt across commodity markets. Cocoa prices have risen 37% since the start of June, while coffee prices are up 26%, as traders anticipate weaker harvests due to drought, excessive heat and volatile rainfall. Lower water levels in the Panama Canal have also reduced shipping capacity and increased transit costs along one of the world’s most important trade routes. While weather events rarely drive markets on their own, the knock-on effects through commodity prices, supply chains and inflation mean investors are watching developments closely in the months ahead.

Source: Financial Times, Reuters, Goodbody