El Niño is a natural climate phenomenon characterised by the warming of the ocean surface in the central and eastern tropical Pacific Ocean, that typically occurs every two to seven years and tends to last between nine and 12 months. The latest monthly Global Seasonal Climate Update from WMO signals a clear shift in the Equatorial Pacific: sea-surface temperatures are rising rapidly, pointing to a likely return of El Niño conditions as early as May–July 2026. Forecasts indicate there is a “nearly global dominance of above-normal land surface temperatures” in the upcoming three-month period, and regional variations in rainfall patterns. El Niño is likely because of increasing subsurface temperature anomalies and recent westerly wind anomalies over the western Pacific Ocean. However, the possible outcomes range from ENSO-neutral to a very strong El Niño during the upcoming Northern Hemisphere winter. The possibility of a very strong El Niño (1 in 4 chance of Niño-3.4 ≥ +2.0°C) largely depends on the continuation of westerly wind anomalies across the equatorial Pacific throughout the Northern Hemisphere summer months. In summary, ENSO-neutral conditions are present and are favored through April-June 2026 (80% chance). In May-July 2026, El Niño is likely to emerge (61% chance) and persist through at least the end of 2026. A strong El Niño implies lower crop yields and higher energy demand. With the global supply chains currently broken, fuel prices and fertiliser prices sky high, we believe food inflation globally might make new records. Even currently in US, wheat prices have risen to the highest in the last 2 years. We expect the UN Food index to go to 150 levels by Sep’26 from the current 128 levels. Most impacted food items might be cocoa, food oils, rice & sugar. Also, water intensive crops such as rice, cotton & sugarcane should see significant price rises globally. Power prices via traditional power sources such as coal fired or hydel resources also might see elevated levels across the globe.
