A Sea Change for Commodity Prices: Why Markets appear to be Underpricing El Niño Risks

El Niño’s return may intensify food price inflation just as supply chains remain under pressure, creating a more challenging backdrop for markets. In this environment, commodities could offer a useful hedge against rising input costs and broader inflation persistence.

Investors may find that selective exposure to energy, agriculture, and industrial metals helps diversify portfolios while capturing demand tied to supply constraints. The opportunity is compelling, but volatility can be sharp when weather patterns and geopolitical risks intersect.

A measured increase in commodity allocations may help balance risk while positioning portfolios for further price shocks.