A super El Niño and Iran war could break global food prices until 2028

The US National Oceanic and Atmospheric Administration has assigned a 63 % probability that a super El Niño will develop by late 2026, with sea‑surface temperatures likely to exceed 2 °C above normal. The emerging climate event is colliding with an Iran‑war food‑price shock that pushed the FAO Food Price Index to 131.2 in May 2026 — its highest level in three years.

Goldman Sachs projects a 15.8 % surge in global food‑commodity prices, with the full impact not arriving until late 2028. The lag complicates central‑bank efforts to distinguish a slow‑building supply shock from entrenched inflation.

Global food‑commodity prices are expected to climb 15.8 % during the unfolding 2026‑27 El Niño cycle. The increase arrives on top of a three‑year price high forced by the Iran war — a dual supply shock that will not fully land until the second half of 2028.

The delayed peak is the part central‑bank models were not built for. When the most severe harvest losses strike, many policymakers will already have started easing interest rates, reading the earlier data as a transitory blip. The collision of a record‑strength El Niño with the highest food prices since mid‑2023 raises the odds that they get it wrong.

The data that turns a forecast into a supply‑chain threat

In its June 2026 outlook, NOAA gave a 63 % chance that the Niño‑3.4 sea‑surface‑temperature anomaly crosses +2.0 °C above the 1991‑2020 average by late 2026 — the threshold for a “very strong” event historically linked to drought across South and Southeast Asia and flooding in parts of South America. That probability is the highest NOAA has issued at this lead time since its modern ENSO monitoring began.

Meanwhile, the FAO Food Price Index reached 131.2 points in May 2026, 12.4 % higher than a year earlier. Cereals and vegetable oils led the advance, reflecting the Iran war’s disruption of Black Sea trade routes and fertiliser supply. “The food system enters the second half of 2026 with buffers, but with little margin for error,” UniCredit analysts wrote in a note to clients.

The bank’s stress‑test models an extreme case in which global agricultural output drops 14.3 %, worth $342 billion, with core commodity prices spiking 10 % to 50 %. Exposed crops — rice, palm oil, sugar, coffee — could rise 50 % to 100 % or more. Goldman Sachs’ economists calculate a 15.8 % lift in global food‑commodity prices and a 1.3 % rise in Eurozone food costs that will be “fully realised” only in H2 2028 because planting, growing and logistics cycles operate on staggered clocks.

The Indian monsoon has already buckled. Goldman Sachs analysts confirmed that some regions received just 25 % of normal June rainfall, central India 50 %. Output of wheat, rice and sugar cane is at risk — a threat that carries immediate fiscal weight because India’s National Food Security Act obliges the government to supply subsidised cereals to roughly two‑thirds of the population.

Kristie L. Ebi, professor of global health at the University of Washington, has warned that strong El Niño events superimposed on anthropogenic warming raise the likelihood of simultaneous crop failures across regions, heightening global food‑price and food‑security risks. The mechanics are straightforward: drought in Southeast Asia and southern Africa, flooding in southern Brazil and Argentina, and warmer, wetter conditions that spread crop disease.

The numbers behind the coming price crunch tell a more precise story.

UBS analysts note that “even modest supply disruptions could trigger larger price moves than historical patterns would imply” because the food system is already stressed. The interaction of conflict and climate, they added, lowers the threshold for sharp swings. Gita Bhatt, the IMF’s head of policy communications, has described the resulting dynamic as “climateflation” — a persistent inflation pressure that complicates central‑bank efforts to control it.

However, these early‑season ENSO forecasts carry substantial uncertainty. The 63 % probability still leaves a 37 % chance the anomaly falls short of the super‑El Niño threshold, and the track record of intensity predictions at this lead time is mixed. The ECB’s 9 % price‑impact estimate is also a model output, not an observed outcome, and was calculated under a different global‑trade environment.

The inflation shock central banks are not calibrated for

The ECB’s climate‑risk framework explicitly recognises that events such as El Niño can shift inflation and output, requiring the bank to integrate climate into its macroeconomic models. But the models were built for shocks that arrive and fade. The current episode — a war‑driven food‑price high meeting a slow‑building El Niño that peaks when central banks expect inflation to retreat — fits none of the standard templates.

Food inflation in advanced economies hit 5.2 % in May 2026, compared with 3.1 % headline inflation, the OECD reported. The World Bank’s agricultural‑commodity price index was 11.6 % higher in the first quarter of 2026 than a year earlier. Robusta coffee futures had already climbed 18 % between January and June on weather concerns in Brazil and Southeast Asia.

Vítor Constâncio, former ECB vice‑president, has argued that climate‑related food and energy shocks are likely to make inflation more volatile and complicate policy calibration. Ayhan Kose, the World Bank’s prospects director, warned in April 2026 that a strong El Niño on top of elevated conflict‑driven prices could trigger “a new wave of food insecurity and debt stress” in import‑dependent developing countries.

Rachel Kyte, dean emerita at Tufts Fletcher School, calls the overlap of climate events and conflict a “new normal” of chronic food‑price volatility that investors and policymakers have not yet priced in. The FAO’s June cereal‑supply brief projects global production at 7.3 % below utilisation in 2026/27, tightening stocks and amplifying price sensitivity to any further disruption.

In Southeast Asia, Indonesia and Malaysia face drought‑driven palm‑oil yield losses that could raise export revenues for producers but increase input costs for food manufacturers in the Philippines and Thailand. India’s monsoon deficit threatens rice and sugar output, and any export restrictions would lift prices in Bangladesh, Sri Lanka and Nepal. Those neighbours may respond with grain stockpiling and food‑subsidy expansions, increasing their fiscal and external vulnerabilities.

If the predictions are right, the worst harvest damage will arrive just as many central banks expect to declare victory over inflation. That timing mismatch — not the weather alone — is what turns a large El Niño into a policy mistake with a long tail. The question is not whether the shock will come. It is whether the institutions we have built to read it are looking at the right clock.

Beyond the headline

The Bigger Picture

Supply shocks are growing more frequent, longer‑lasting and more synchronised across continents. That raises the probability that food‑price spikes feed into broader instability: debt distress in import‑dependent economies, and political backlash in rich countries where households feel squeezed even as headline growth looks solid.

The Money Trail

Behind the looming price shock is a redistribution of gains and losses. Commodity traders and diversified agribusinesses with storage capacity stand to profit from volatility, while food‑importing governments and low‑margin processors carry rising costs. Central banks confront the risk that climate‑linked inflation erodes real incomes faster than wage growth.

The Timing

El Niño’s peak harvest impacts will coincide with already‑elevated prices from the Iran war, just when central banks hope to normalise policy. That increases the danger that policymakers misread a slow‑burn supply shock, ease prematurely and then face the need for abrupt reversals when food inflation re‑accelerates in 2028.

What a late‑peak food‑price shock means for the West

With the delayed impact not fully arriving until 2028, Western households, investors and central‑bank watchers face decisions that outpace the standard policy‑reaction playbook.

• Grocery shoppers in Europe and North America

  Track the FAO Food Price Index, particularly its cereals and vegetable‑oils components. Sustained month‑on‑month increases through early 2027 would be an early signal that your food bill is set to climb further, regardless of what headline inflation numbers show.

• Agricultural commodity investors

  Monitor the World Bank’s quarterly Commodity Markets Outlook for updated price projections and risk assessments tied to El Niño. Pay attention to palm‑oil, robusta coffee and rice futures, where regional supply disruptions could produce outsized moves before broader indices react.

• Central‑bank and policy watchers

  Watch for tension between food‑inflation data and the policy-easing narrative. If the ECB’s climate‑inflation modelling or the Fed’s commentary begin to distinguish transient from embedded food‑price pressures, it will signal that a late‑cycle re‑acceleration is being taken seriously inside the monetary‑policy machinery.

Explainer

El Niño

A natural climate pattern driven by shifting winds that push warm water across the equatorial Pacific, disrupting global weather. Its strongest episodes, such as the 2015‑16 event, have caused widespread drought across India and Southeast Asia and flooding in parts of South America. The current forecast places the 2026‑27 cycle among the most intense on record.

ENSO

The El Niño‑Southern Oscillation, a climate system that swings between warm (El Niño), neutral and cool (La Niña) phases. Forecast centres use the Niño‑3.4 index of sea‑surface temperatures to measure its strength. A +2.0 °C anomaly above the long‑term average is the threshold for a “very strong” event.

climateflation

A term used by the IMF and UniCredit to describe persistent, climate‑driven food‑price inflation. It captures how events such as El Niño, when layered onto global warming and conflict, create supply‑side price pressures that are more durable than standard commodity cycles. The IMF has argued these dynamics complicate central‑bank inflation‑targeting frameworks.

FAO Food Price Index

A monthly gauge of international prices for a basket of staple food commodities — cereals, vegetable oils, meat, dairy and sugar. It is compiled by the United Nations Food and Agriculture Organization and serves as the benchmark for global food‑price trends. In May 2026 it hit 131.2, its highest reading since mid‑2023.