The return of El Niño and the growing risk of a future Super El Niño could significantly disrupt global logistics networks, particularly through capacity reductions at the Panama Canal caused by low water levels. Combined with ongoing geopolitical challenges affecting the Strait of Hormuz, the world faces a dual supply chain shock that could drive higher freight rates, energy costs, and food prices while increasing pressure on global trade flows
The Japan Meteorological Agency (JMA) officially announced the return of El Niño on June 10, accompanied by a warning that there is a 67% probability the phenomenon could intensify into a Super El Niño by 2027. The announcement comes at a particularly vulnerable moment for global logistics and food supply systems, which are already grappling with the largest oil supply shock since the 1970s and ongoing fertilizer disruptions linked to the Strait of Hormuz. Historical data from Dartmouth College indicate that the 1997-1998 El Niño event caused an estimated USD 5.7 trillion in global economic losses, highlighting the potential scale of disruption to energy infrastructure and international transport networks.
One of the most immediate logistics risks lies at the Panama Canal, where declining water levels could once again force restrictions on vessel transits. According to climate forecasts, severe El Niño conditions may significantly reduce rainfall in the Gatun Lake watershed, lowering daily vessel throughput from a typical 36-38 transits to approximately 22-24. Reduced capacity at the Panama Canal, combined with continued disruptions affecting the Strait of Hormuz, would place unprecedented pressure on two of the world's most critical maritime chokepoints. The result could be extended transit times, higher rerouting costs, and increased freight expenses across major Pacific-Atlantic trade lanes.
Energy markets are also facing mounting pressure. Since late February 2026, gasoline prices have reportedly risen by 52%, while jet fuel prices have increased by 58%. El Niño-driven drought conditions threaten hydroelectric-dependent economies such as Brazil, where hydropower accounts for the majority of electricity generation. Reduced hydroelectric output, combined with surging cooling demand during periods of extreme heat, is expected to tighten power supply, increase electricity costs, and place additional strain on industrial production.
For Southeast Asia-including Vietnam, Laos, and Thailand-prolonged drought conditions could reduce water availability for hydropower generation and increase manufacturing costs across regional supply chains. This risk is particularly significant as these countries continue to attract manufacturing investment relocating from China. Meanwhile, drought conditions in Indonesia and Malaysia, which together account for roughly 85% of global palm oil exports, are driving vegetable oil prices higher and adding further pressure to global food inflation.
The World Food Programme has warned that if El Niño severely disrupts India's monsoon season, global food security risks could escalate significantly. Experts from Food and Agriculture Organization note that the combination of fertilizer shortages linked to Hormuz disruptions and water scarcity caused by El Niño could create nonlinear impacts on agricultural productivity, where combined losses exceed the sum of individual risks. Over the next 12 months, logistics performance will depend heavily on how shippers adapt to capacity constraints at key maritime chokepoints and how policymakers manage inflationary pressures stemming from elevated energy and agricultural commodity prices.
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