Just as the global economy begins to cautiously emerge from the crisis of the Iran war, another one is on the horizon — and this time it is completely beyond the control of politicians.
An El Niño event — a natural phenomenon generally associated with higher temperatures — has now been officially confirmed in the Pacific Ocean, according to the United States National Oceanic and Atmospheric Administration (NOAA). The first forecasts indicate that it could be of major proportions, both for the climate and for the global economy.
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Although the cycle is still in its infancy, this El Niño promises to be intense, and its climate effects could quickly spread across the world. Previous episodes have put pressure on supply chains, raised costs and increased risks in sectors vulnerable to climate change, such as agriculture and the entire global food supply chain.
If current predictions are correct, the phenomenon forming in the Pacific Ocean could do much more than just change rainfall patterns.
“El Niño is often treated as just a meteorological issue, but in 2026, this could lead to a dangerous sense of complacency,” wrote Robert Muggah, a political scientist who has advised several governments on security issues, in an article published this month in the World Economic Forum.
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“The latest forecast should be seen as an early warning for governments, businesses and humanitarian agencies to prepare for what could be a major systemic shock,” he wrote.
Rains, droughts and losses of trillions
El Niño tends to form every few years due to weakening wind patterns over the Pacific Ocean, and its conditions typically persist for up to a year. Under normal circumstances, prevailing winds push warmer surface waters away from the Americas and toward Asia and Oceania.
El Niño interrupts this process, keeping these waters warm near the coasts of North America and South America. This changes climate patterns across the planet, influencing everything from dry periods in Indonesia to more intense rains in the southern United States.
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The intensity of an El Niño event is usually linked to how much the Pacific waters are above average temperatures, and some initial forecasts are already warning of a particularly strong episode this year.
NOAA’s announcement indicated a 63% probability that sea surface temperatures in the Pacific will exceed 2.0°C above average, a level that would characterize a “very strong” El Niño.
The World Meteorological Organization offered a similar forecast, projecting an “at least moderate — and possibly strong” event, comparable to previous episodes accompanied by significant warming.
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This is not a good sign for the world economy. A study published in 2023 in the journal Science analyzed the costs associated with two particularly strong El Niños, which occurred in 1982 and 1997 — two of the three most intense episodes ever recorded — and concluded that climate change caused by these phenomena caused global income losses of US$4.1 trillion and US$5.7 trillion, respectively.
These losses were mainly manifested by damages resulting from extreme weather events, such as losses in agricultural production caused by heat waves and floods.
Over the course of the 21st century, the accumulated effects of El Niño events could add up to US$84 trillion in economic losses, the study concluded.
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Specific estimates of the costs associated with this year’s El Niño will probably take a few months to be released, but analysts are already projecting a difficult period ahead, mainly because many models indicate that the 2026 El Niño could have an intensity comparable to that of major episodes in the past.
According to an analysis published on Monday by the risk rating agency Fitch, the impacts will be more severe in the poorest countries.
Nations dependent on agriculture will likely face higher costs and greater losses caused by environmental factors, although inflation is expected to become a global problem, even affecting rich countries through rising food prices.
“Prolonged shortages could amplify risks to prices of globally traded food commodities caused by the El Niño phenomenon, potentially affecting inflation prospects even in countries with high credit ratings,” Fitch analysts wrote.
Several essential agricultural crops grown in more vulnerable countries — including wheat, corn and rice — are expected to see price increases throughout the El Niño cycle, according to another forecast published on Monday by the European Commission.
The consequences of a strong El Niño will also add to the lingering effects of the war in Iran, which has already raised global prices for common agricultural inputs such as fertilizers.
Even items that can be produced will face difficulties due to restrictions on global trade. In addition to high fuel prices caused by war, El Niño has historically harmed maritime transport by reducing water levels at strategic navigation points.
In 2023, a strong El Niño caused a prolonged drought in Central America, causing water levels in the Panama Canal to reach historic lows. The episode forced operators to reduce the daily number of crossings from 36 ships to just 24.
A recent update from the Panama Canal Authority projected few major changes in traffic volume this year, but indicated it is already working on operational changes for 2027, when El Niño’s effect on water levels is expected to peak.
The global economy was already incorporating the expectation of interruptions in energy supply over the next year, but it may still have to prepare to face new impacts.
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