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Super El Niño and Middle East tensions could reaccelerate inflation
JPMorgan estimates the combined shock could add about 0.3 percentage points to headline inflation next year and lift global food inflation by roughly 0.7 percentage points at its peak.
JPMorgan warned that a potential “super” El Niño could collide with a supply-driven oil shock, potentially slowing the global inflation decline next year, according to OilPrice. The bank said the weather-driven risks and higher energy costs tied to the Middle East conflict could together add about 0.3 percentage points to headline inflation worldwide next year.
The bank put the odds of the current El Niño strengthening into a “very strong” or “super” event at 81% by the end of the year, and it estimated a 97% probability the conditions persist into 2027. JPMorgan said a super El Niño typically disrupts agricultural production across parts of Asia and Latin America through droughts, excessive rainfall, and shifting growing seasons.
OilPrice added that JPMorgan estimates such agricultural disruption could lift global food inflation by about 0.7 percentage points at its peak. When combined with higher oil prices, tighter diesel supplies, more expensive fertilizer, higher transportation costs, and elevated packaging costs, the increase in food inflation could reach about 1.3% to 1.5%.
OilPrice also noted that Brent crude climbed above $100 a barrel this week after renewed fighting around the Strait of Hormuz and Houthi attacks on tankers in the Red Sea threatened export routes used by Gulf producers. It cited additional pressure from Kazakhstan cutting oil production after drone attacks halted tanker loadings at the Caspian Pipeline Consortium terminal on the Black Sea.
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