While investors remain focused on geopolitics, tariffs and the outlook for interest rates, another potential inflationary risk is beginning to emerge. As disruption to global fertiliser supplies coincides with the prospect of a powerful El Niño event, Tony Wilkinson, Investment Director at Collidr, examines how these converging pressures could reshape the inflation outlook and present fresh challenges for markets.
British consumers are already feeling the strain of a prolonged period of food price inflation. Supermarket bills have risen sharply over the past two years, and while the rate of increase has eased somewhat from the peaks of 2023, prices remain elevated, and the trajectory is once again turning upward.
For households already grappling with higher mortgage costs and energy bills, the food price burden has become one of the most tangible and politically charged dimensions of the cost-of-living crisis.
A convergence of geopolitical disruption, agricultural supply shocks, and climate risk is now building in the global commodity system that could reignite food price pressures with renewed severity.
The global picture
The world economy is already navigating treacherous waters. The near closure of the Strait of Hormuz, a severe disruption to global fertiliser supply chains, and persistent inflation have left commodity markets in a state of acute fragility.
Against this backdrop, a new and potentially decisive threat is rapidly materialising: climate scientists now believe there is a high probability that a powerful, potentially record-breaking El Nino event will peak this autumn, with consequences for global food, energy, and financial stability that could rival the largest simultaneous commodity supply shocks of the modern era.
What the science says
Leading climate institutions have shifted from cautious to alarming. The WMO reports sea-surface temperatures in the equatorial Pacific rising rapidly, with El Nino conditions expected as early as May to July 2026. Subsurface ocean heat content already exceeds levels seen at the same stage of the 2023 event, and upper-range forecasts raise the prospect of a “super” El Nino rivalling the catastrophic 1877-78 episode.
The fertiliser crisis
Before examining what El Nino will do to harvests, it is essential to understand the condition in which global agriculture already finds itself, because the Strait of Hormuz crisis has delivered a severe shock to the inputs on which modern farming depends.
The strait’s role as the world’s most critical fertiliser corridor has received far less public attention than its importance warrants. Nearly 50% of global urea exports and approximately 50% of global sulphur exports originate from countries west of the strait and transit directly through it. Up to 30% of all globally traded fertiliser products — around 16 million tonnes annually — pass through Hormuz under normal conditions.
The disruption has been swift and severe. Data analytics firm Kpler and commodity analysis company CRU estimate the crisis has temporarily affected roughly one-third of globally traded fertiliser volumes, stalling an estimated 3 to 4 million tonnes per month. The sulphur dimension is particularly insidious: sulphur is a key feedstock to the production of phosphate fertilisers, meaning the closure of the strait compounds the disruption well beyond nitrogen markets alone.
The price response has exceeded the speed of any comparable modern shock. Urea prices rose approximately 50% between late February and mid-March 2026, surpassing even the pace of the 40% rise seen over one to two months following Russia’s invasion of Ukraine in 2022.
A critical structural vulnerability compounds the supply problem: unlike oil, G7 nations maintain no strategic fertiliser reserves. The exposure across importing nations is uneven and severe. The UN World Food Programme has warned that an additional 45 million people could join the more than 300 million already food-insecure by the end of 2026.
Agricultural shockwaves
It is into this already damaged agricultural system that El Nino is now arriving. The phenomenon classically brings drought to South and Southeast Asia, Australia, and parts of southern Africa — precisely the regions that supply the world’s rice, wheat, palm oil, and sugar. The compounding of input-cost inflation with climate-driven yield destruction is a qualitatively different threat from either crisis acting in isolation.
Particularly exposed commodities beyond grains include rice, palm oil, sugar, cocoa, and soy-linked products, with risks compounding across a broad range encompassing bananas, coffee, tea, and soy-fed meat.
The World Bank’s April 2026 Commodity Markets Outlook records fertiliser prices reaching their highest level since 2022, having risen more than 12% in Q1 2026 alone. The FAO’s Food Price Index rose 2.4% between February and March 2026 alone, reaching its highest level since December 2025 — and El Nino has not yet fully materialised.
Two shocks, one harvest
Perhaps the most underappreciated dimension of this crisis is one of timing. El Nino typically produces its maximum agricultural supply impact with a 6 to 12-month lag after peak ocean temperatures.
A climatic peak in late 2026 therefore translates into the sharpest production losses arriving in 2027 — mapping almost exactly onto the Hormuz fertiliser disruption timeline. Two independent supply shocks with similar lag structures are converging on the same crop cycle in the same window.
This convergence is not theoretical. The FAO has explicitly warned that reduced availability of ammonia, urea, phosphate, and sulphur-based fertilisers might impact global food security by lowering the production of staple crops like wheat, maize, and rice within the next 6 to 9 months.
El Nino’s contribution to that same crop cycle then arrives immediately after, hitting harvests across Asia and the Southern Hemisphere through 2027. The two shocks do not simply add together; they interact across the same depleted supply chains, the same thin stockpile buffers, and the same fiscally constrained governments with limited capacity to respond.
The stagflation trap
The IMF’s April 2026 World Economic Outlook projects global growth at just 3.1% with headline inflation at 4.4% under a moderate conflict scenario — described as a sharp deviation from the global disinflation trend of recent years.
An adverse scenario incorporating sharper energy price increases reduces growth to 2.5% and pushes inflation higher still. Layering a severe El Nino onto either scenario introduces a further supply shock arriving precisely when inflation expectations are most vulnerable.
The World Bank projects global commodity prices rising 16% in 2026, the first annual increase since 2022, driven primarily by energy and fertiliser markets, and explicitly identifies a potentially strong El Nino as an upside risk to food prices beyond baseline projections.
Central banks face an exceptionally difficult calculus. The inflation building in the system is supply-driven: prices are rising because physical supply chains have been disrupted, harvests are threatened, and fertiliser is not reaching farmers.
Raising rates does nothing to reopen the Strait of Hormuz or restore monsoon rainfall — it suppresses demand without addressing the underlying constraint. Holding rates risks allowing inflationary expectations to become entrenched.
There is no policy instrument well-suited to a simultaneous food, energy, and climate shock of this kind. That is precisely what makes the stagflationary dynamic so difficult to escape.
What this means
For British households, the implications of these converging global pressures are direct and material. The UK imports a substantial share of its food, and its supermarket shelves are highly sensitive to disruptions in global commodity supply chains.
Industry analysts warn that UK food inflation, which appeared to be easing in late 2025, could reaccelerate through 2026 and into 2027 as global commodity prices feed through the supply chain. British farmers are themselves not immune: fertiliser costs represent one of the largest variable inputs in arable and dairy farming, and UK agricultural producers have already flagged significant margin pressure.
For policymakers, the challenge is significant. The Bank of England cannot grow a single grain of wheat or redirect a fertiliser tanker. Its tools are blunt instruments in the face of a supply-side shock of this nature.
For consumers, the message is sobering: the food price pressures of the past two years may not be behind us. The forces gathering in the Pacific Ocean and the Persian Gulf are likely to ensure that the cost of filling a supermarket trolley in Britain remains one of the defining economic anxieties of the years ahead.
