Overview
Marex Solutions chief executive Nilesh Jethwa said on Thursday that global markets may not be adequately pricing in the risks associated with a very strong El Nino. He argued that a meaningful assessment of potential weather impacts has been crowded out in investor attention by the Middle East conflict and valuation dynamics in the technology sector.
Market focus and risk assessment
In a note to clients, Jethwa suggested that what remains underappreciated is how disruptive weather patterns could interact with market structures to amplify price moves. He cautioned that volatility could increase materially if significant weather disruption occurs at the same time as concentrated supply positions, low inventories, or if governments enact restrictive trade policies.
Jethwa singled out rice and cocoa as examples of commodities where supply concentration could make markets particularly sensitive to weather shocks. He also highlighted the possibility that authorities might impose trade flow restrictions to secure domestic supplies - a development he said would have price effects for some commodities.
Climate outlook
The U.S. Climate Prediction Center has assessed an 81% probability that the ongoing El Nino will continue into 2027 and indicated that it would qualify as a very strong event. That assessment underpins Jethwa's warning about the potential for weather-driven market disruption if other structural vulnerabilities are present.
Implications
Jethwa's comments point to a scenario in which a pronounced El Nino works in concert with existing market features - supply concentration, limited inventories, and policy responses - to elevate price volatility. He framed the remark as a caution to market participants to consider weather risk alongside geopolitical and sector-specific developments that have recently dominated investor attention.
Note on source material
The views reported above reflect the statements made by the Marex Solutions CEO and the probability assessment provided by the U.S. Climate Prediction Center. The assessment of potential market outcomes described here is drawn directly from those statements.