4 September 2026
Executive Summary
The World Meteorological Organization has issued its strongest warning yet over the rapidly intensifying El Niño, creating a significant forward risk for agriculture, water, power generation, transport and international supply chains.
El Niño is now firmly established in the tropical Pacific and is expected to strengthen further during the coming months.
WMO forecasts indicate a near-100% likelihood that the event will persist through February 2027, with very strong intensity expected before it peaks towards the end of this year.
Sea temperatures across the central and eastern equatorial Pacific are already significantly above normal.
Weekly temperatures in the important Niño 3.4 monitoring region reached approximately 2.2°C to 2.6°C above average during late July and mid-August, while some subsurface ocean temperatures were more than 8°C above normal.
The consequences will not be identical everywhere.
El Niño changes atmospheric circulation and rainfall patterns, increasing the probability of drought in some regions while increasing heavy rainfall, flooding and extreme heat in others.
WMO is warning governments and businesses to use the current forecast window for preparedness rather than waiting for individual disasters to occur.
That is the crucial commercial distinction.
El Niño is not one weather event. It is a global risk multiplier capable of creating different operational problems simultaneously across multiple supply-chain regions.
UK Impact
UK businesses may be geographically distant from the tropical Pacific but remain extensively exposed through international supply chains.
Potential impacts include:
- Agricultural commodity shortages.
- Higher food prices.
- Reduced crop yields.
- Water shortages.
- Hydroelectric disruption.
- Heat-related electricity demand.
- Flooded roads and railways.
- Port disruption.
- River-navigation restrictions.
- Drought-related canal restrictions.
- Higher shipping costs.
- Manufacturing interruptions.
- Commodity-price volatility.
- Business-interruption losses.
The exposure can also travel through suppliers.
A UK manufacturer may have no direct exposure to an El Niño-affected region while relying upon components, raw materials or packaging produced there.
Food and beverage companies face particularly complex exposure because several major agricultural regions can experience very different weather consequences at the same time.
Businesses should therefore identify where their critical raw materials actually originate, rather than simply where their immediate supplier is located.
Global Impact
The scale of the current forecast means El Niño should increasingly be treated as a strategic business-continuity issue rather than a seasonal weather concern.
Important areas of potential exposure include:
- South and Southeast Asian agriculture.
- Latin American agriculture.
- Central American food production.
- Hydroelectric-dependent economies.
- Pacific and Asian shipping routes.
- Drought-sensitive waterways.
- Tropical storm regions.
- Global food commodity markets.
A powerful El Niño can produce contradictory commercial effects.
Additional rainfall may improve crop conditions in one country while flooding harvests and transport infrastructure in another.
Drought may damage agricultural production while simultaneously reducing river levels needed to transport commodities.
Extreme heat can increase electricity demand at exactly the point when drought reduces hydroelectric generation.
This interrelationship is important.
Physical weather risk can become energy risk, transport risk, commodity risk and ultimately financial risk.
Our View
Businesses should use the forecast period before El Niño reaches its expected peak to stress-test their operations.
Companies should ask:
- Which suppliers operate in El Niño-sensitive regions?
- Where are our critical raw materials produced?
- Are any commodities dependent upon one geographic region?
- Which ports handle those commodities?
- Are inland transport routes vulnerable to flooding?
- Are waterways vulnerable to drought?
- Could low reservoir levels affect power generation?
- Could extreme heat interrupt manufacturing?
- Do suppliers have alternative production facilities?
- How much safety stock is genuinely available?
- Could inventory be moved earlier?
- Have alternative suppliers been pre-qualified?
- Are commodity prices hedged where appropriate?
- Does property insurance include flood and storm?
- Does business-interruption cover require physical damage?
- Is contingent business interruption available for supplier losses?
- Are catastrophe deductibles or sublimits understood?
The greatest mistake would be waiting for a particular flood, drought or crop failure before acting.
WMO has provided businesses with something risk managers rarely receive:
advance warning of a potentially exceptional global event.
The opportunity now is to use it.
Risk Indicator: SEVERE – CLIMATE, SUPPLY CHAIN & BUSINESS INTERRUPTION
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The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.
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