El Niño Could Bring Storms to the Markets

A high probability for an El Niño event in the second half of 2023 brings concerns of extreme weather, persistent inflation, supply chain disruptions, and market volatility.

Weather rarely has a material impact on overall markets. But that could change in the coming quarters as the potential for extreme weather heightened by El Niño could cause significant economic disruptions. The World Meteorological Organization has announced a 90% probability of an El Niño event in the second half of this year. This phenomenon refers to a warming surface of the Pacific Ocean that can cause shifts in both temperature and weather patterns. Extreme heat is already being felt with the hottest week on record for the entire planet at the beginning of July, following the hottest June on record according to the World Meteorological Organization. Fierce heatwaves are being felt across the globe, including one last week that dried up some of Europe's main rivers, threatening supply chains and energy supplies.

  • In Germany, the Rhine at Kalb fell below 100 centimeters, making the river potentially impassable for most barges carrying industrial products and coal.
  • In France, the Rhone has been too warm to cool nuclear reactors for Electricite de France, leading to shutdowns and lower output.
  • In Eastern Europe, the Danube at Budapest is down to 135 centimeters, threatening a key Ukrainian grain transport route.

Rhine waters levels at Kaub