JPMorgan Warns Super El Niño and Middle East Energy Shock Could Compound Asia's Food Inflation
JPMorgan says an 81% chance of El Niño intensifying by year-end, layered on sustained high oil prices, could push food inflation up by 1.3 to 1.5 percentage points globally.
JPMorgan on Friday (2026-07-24) warned that the current El Niño has an 81% probability of strengthening into a "very strong" or "super" event by the end of 2026, and that layering the pattern on top of Middle East energy disruption could push the global food inflation increase to between 1.3 and 1.5 percentage points. The bank's baseline projection is a 0.7 percentage point lift at peak.7
The gap between baseline and stress scenario is energy. JPMorgan's more severe estimate assumes $100 crude, tighter diesel supplies, more expensive fertiliser, and elevated transportation and packaging costs arriving simultaneously. Emerging markets, where food accounts for a larger share of household budgets, are expected to absorb the bulk of the shock.7
ICE Brent crude front-month was trading at $96.02 per barrel on Friday (2026-07-24), already elevated following months of Middle East conflict that has disrupted Gulf supply chains. The Strait of Hormuz carries roughly 20% of the world's petroleum and liquefied natural gas through a 39-kilometre choke point. Any sustained return of flow disruption resets the base cost for nearly every energy-dependent input in food supply chains.5
The fertiliser channel is where the agricultural hit concentrates. The Economist reported in May (2026-05-17) that the conflict had ensnared roughly a third of global seaborne fertiliser trade, with price pressure expected to compound as the sowing season advances. Fertiliser costs feed directly into crop yields, and a squeeze during planting registers in food prices months later.1
The Asian Development Bank had projected consumer prices across the region would rise just 2.1% in 2026. It now warns that figure could exceed 5% depending on how long the conflict lasts.1 That revision is most consequential in crude-import-dependent economies. India sources nearly 85% of its crude oil requirements externally, and rating agency ICRA estimates that every $10-per-barrel increase in average crude prices lifts India's net oil import bill by $13 to $14 billion while widening the current account deficit by around 0.3% of GDP.5,2
Saudi Arabia's price move on Monday (2026-07-06) cut across the inflationary backdrop from a different direction. Saudi Aramco slashed Arab Light official selling prices to Asian buyers by $11 per barrel for August cargoes, the biggest single reduction in more than two decades, as competition from Russian and Iranian crude intensified. The kingdom holds around 14% to 15% of global crude exports, and analysts said the cut was about protecting market share, not signalling demand weakness.3,5,4
The discount has pulled Brent back toward levels seen before the US-Israel conflict with Iran erupted in late February. Goldman Sachs, in a note released on June 15 (2026-06-15), cut its Brent price forecast on expectations that Persian Gulf exports would recover faster than previously anticipated following the expected Hormuz reopening, and the bank projected a global oil surplus of 3.2 million barrels per day in 2027. Goldman's revised forecast put Brent at $80, well below JPMorgan's $100 stress assumption.2
But the food inflation risk does not collapse with oil prices. El Niño operates through drought patterns, flooding cycles, and disrupted growing seasons, mechanisms that cheaper crude does not offset. The ADB's revised inflation ceiling above 5% sits against a pre-conflict baseline of 2.1% and a 2026 Asia-Pacific growth forecast already cut to 4.9%, suggesting regional macro buffers have narrowed.1,6
JPMorgan gives a 97% probability that El Niño conditions persist into 2027, which stretches the agricultural risk window beyond the current sowing cycle. Fertiliser trade disruption spanning multiple planting seasons compounds differently from a single weather event.7,1
The number that determines which JPMorgan scenario dominates is crude. If ICE Brent crude front-month holds above $96 through the fourth quarter and approaches the $100 stress threshold while meteorological agencies confirm El Niño intensification, the 1.3% to 1.5% food inflation scenario becomes the working assumption for commodity desks covering South and Southeast Asia rather than a tail risk. Goldman's 2027 surplus offers some offset, but surplus barrels take time to reach markets, and fertiliser flows running through conflict zones do not normalise on commodity-exchange schedules.7,2