The global economy faces a potentially dangerous convergence of two independent forces — a strengthening El Niño weather pattern and a supply-driven oil shock fueled by Middle East conflict — that could meaningfully slow the pace of disinflation worldwide, according to a fresh warning from JPMorgan. The bank warned on Friday that a "super" El Niño combined with elevated energy prices stemming from the ongoing Middle East conflict could add roughly 0.3 percentage points to headline inflation globally next year. JPMorgan places the probability of the current El Niño strengthening into a "very strong" or "super" event at 81% by year-end, with a 97% chance conditions persist into 2027.
While neither development would be especially alarming in isolation, their simultaneous occurrence raises the stakes considerably. A super El Niño typically disrupts agricultural output across Asia and Latin America through droughts, excessive rainfall, and shifting growing seasons. JPMorgan estimates such a scenario would lift global food inflation by approximately 0.7 percentage points at its peak.
However, when combined with triple-digit oil prices, tighter diesel supplies, more expensive fertilizer, higher transportation costs, and elevated packaging costs, the increase in food inflation could reach between 1.3% and 1.5%, according to the bank's analysis. The oil market is already delivering the second half of that equation. 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 the two key export corridors that Gulf producers have depended on for months.
Compounding the supply disruption, Kazakhstan has begun cutting oil production after drone attacks halted tanker loadings at the Caspian Pipeline Consortium terminal on the Black Sea, removing yet another source of internationally traded crude from available supply. Diesel markets are facing even sharper pressure than crude. Middle Eastern refining capacity has yet to fully recover from the war, Russian fuel exports remain constrained following months of Ukrainian drone strikes on refineries, and global refining margins remain near record highs — a combination that leaves little buffer in distillate markets.
JPMorgan expects emerging markets to absorb the brunt of the inflation shock, given that food represents a larger share of household spending in developing economies. The bank identified India, Indonesia, Brazil, and Colombia as among the most exposed nations to the combined weather and energy price shock. Advanced economies are not expected to escape the fallout entirely.
Europe and the United States may avoid the worst direct crop losses, but would still import higher food costs through more expensive fuel, fertilizer, transportation, and global commodity markets, JPMorgan cautioned. Source: OilPrice.com, authored by Julianne Geiger, July 24, 2026.
Source: oilprice.com