El Niño-Driven Commodity Shock Looms as Pacific Heats Up

Barclays analyst Craig Rye warns of an impending commodity shock triggered by an unusually powerful El Niño event in the Pacific. The analyst expects significant disruptions across agriculture, energy, and industrial commodity markets over the next 18 months.

The immediate danger is concentrated in weather-sensitive crops such as palm oil, coconut oil, rubber, and coffee, which are expected to rise between 10% to 40% in price due to drought-related yield reductions.

The El Niño event could also lead to reduced mine production, weaker hydropower generation, and increased demand for thermal coal, potentially leading to price gains of up to 20% for copper and aluminium over the next 18 months.

Barclays is not treating this as a routine seasonal fluctuation, citing multi-model forecasts indicating that the El Niño index could peak near 3.2 degrees Celsius between late 2026 and early 2027, making it roughly 15% stronger than the Super El Niño of 2015 and 2016.