JPMorgan Warns 'Super' El Niño Could Add 0.3 Percentage Points to Global Inflation — Here Are the Risks

Projected Effects on Headline Inflation

JPMorgan's Core Estimate

• JPMorgan economists estimate that the super El Niño combined with elevated energy prices could add 0.3 percentage points to global headline inflation next year, with emerging markets bearing the brunt .
• Sajjid Chinoy, JPMorgan's Head of Asia Economics Research, stated that the El Niño component alone could lift inflation by ~30 basis points (0.3 pp) on average across Asia, though the impact will be uneven across countries .
• The bank sees food inflation potentially rising by 1.3%–1.5% as energy costs amplify crop disruptions .

Broader Emerging-Market Impact

• The Asian Development Bank (ADB) raised its 2026 inflation forecast for developing Asia to 4.3%, 1.3 percentage points above the 3.0% inflation in 2025, citing higher energy prices passing through to food and other costs, with price pressures broadening and likely to remain elevated .
• Allianz Research estimates that Indonesia faces the largest inflationary hit at +2.3 percentage points from food prices, followed by Malaysia and the Philippines, where the impact is estimated at +0.7 percentage points .
• Deutsche Bank warns the climate shock could 'reshape food costs until 2027,' with volatile weather amplifying upward price pressure from the Iran-war oil shock .
• Goldman Sachs estimates that combined energy, fertilizer, and El Niño shocks could add 2.1 percentage points to Southeast Asian food inflation within twelve months .

Compounding Pressures: Energy Prices and Geopolitical Disruptions

The El Niño is hitting an economy already reeling from an energy price spike linked to the Iran conflict, creating a dangerous feedback loop:

• $100+ oil and energy pass-through: JPMorgan's Bruce Kasman notes headline and core inflation have already moved up sharply due to energy price increases . The combination of oil above $100/barrel and the El Niño is expected to prolong global inflation . JPMorgan has officially taken a 'Goldilocks scenario' off the table for the U.S. economy, citing the Iran war and inflation surge likely to spark a negative growth shock .
• Fertilizer supply crunch: Fertilizer trade through the Strait of Hormuz remains down ~30% due to the Middle East crisis, directly raising input costs for staple crops across Asia . Schroders warns that this disruption, combined with shifting rainfall, could push food inflation into double-digits .
• Central bank policy dilemma: The ADB warns that energy-market scars could linger, with disruptions unwinding only gradually and inflationary pressures persisting as spillovers broaden . The Economist Intelligence Unit (EIU) says El Niño will keep Asia's central banks cautious — despite some easing in global energy prices, elevated food inflation and fuel costs prevent a quick pivot to dovish policy, with the Philippines most exposed .
• Sticky inflation as a prevailing theme: JPMorgan's mid-year outlook flags that sticky inflation remains a 'prevailing theme' in their 2026 outlook, and that the ECB and Bank of Japan are expected to raise rates in June 2026, reflecting the broader tightening impulse .

Specific Risks to Agricultural Staples

A Reuters analysis warns that weather anomalies could affect availability and prices into 2027 and 2028, and that companies should stress-test supply chains for price swings of 10%–50% in key agricultural inputs . The World Bank's April 2026 Commodity Markets Outlook projects a 2.5% increase in the global food commodity price index for 2026, but notes risks are 'firmly tilted to the upside' due to El Niño, rising energy and fertilizer costs, and potential trade restrictions .

Policy Recommendations for Building Buffers

Based on the body of warnings, the following policy recommendations emerge from analysts and institutions:

Monetary policy: maintain a cautious, data-dependent stance. The EIU advises central banks should not pivot dovish prematurely — elevated food inflation and fuel costs alongside the El Niño require continued vigilance . JPMorgan's mid-year outlook suggests that central banks in the Philippines, Indonesia, and India could be forced to hike further or delay easing into 2027 .

Fiscal and food-security buffers: build strategic reserves and diversify supply. Given the high probability of export restrictions on rice and other staples, governments should pre-position grain reserves and secure alternative import sources . The Allianz report notes that export bans by major agricultural producers (India, Thailand, Vietnam) could ease domestic pressures but amplify inflation risks for importers .

Agricultural adaptation: accelerate crop-switching programs. India's 2026 advisory urging farmers toward low-water crops is a model — but the question of who bears the transition cost and risk remains unresolved .

Supply-chain stress-testing: prepare for persistent disruption. Companies and governments should model scenarios where fertilizer trade disruption and weather anomalies persist into 2028, and invest in logistics redundancy .

Regional coordination: avoid beggar-thy-neighbor export bans. The Allianz report notes that the highest-inflation Asian economies (Indonesia, Malaysia, Philippines) would benefit from coordinated regional food trade policies rather than unilateral restrictions that amplify price spikes .