A growing chorus of shipbrokers, banks and analysts are warning that the return of the El Niño weather phenomenon later this year could deliver a meaningful boost to shipping markets across multiple sectors, compounding disruptions already in train from the Hormuz crisis and Panama Canal congestion. 

The trigger is a significant upgrade to El Niño probability estimates from the US National Oceanic and Atmospheric Administration (NOAA). NOAA now puts an 82% likelihood on El Niño conditions emerging between May and July 2026, with a 30 to 37% chance of a severe event by year-end. The phenomenon is projected to peak in intensity between the fourth quarter of 2026 and the first quarter of 2027.

El Niño is a naturally occurring climate pattern caused by unusually warm sea surface temperatures in the central and eastern Pacific Ocean. It typically develops every two to seven years and can last from several months to more than a year.

The phenomenon disrupts global weather systems, often bringing droughts to some regions and heavy rainfall or flooding to others.

The disruption is tipped to bolster spot rates across many segments in what has already been an exceptionally strong year for shipping fortunes. The ClarkSea Index – a weighted index covering all commercial shipping segments – stands at $37,758 a day, 75% above the 10-year trend, and with the year-to-date average up 64% year-on-year.

For the Panama Canal, the stakes are well understood by the return of El Niño. BIMCO shipping analysis manager Filipe Gouveia said El Niño poses a direct risk to transit capacity by compromising rainfall and therefore Gatun Lake water levels – the canal’s primary reservoir.

“When El Niño last emerged in 2023, it compromised regular transit conditions for about a year,” Gouveia said. “At its worst point, between December 2023 and January 2024, only 22 daily ship transits were allowed at a maximum draught of 13.4 metres, which is 12% below normal levels.”

Canal authorities offered reassurance at a recent briefing, noting that unusually heavy dry season rainfall has kept Gatun and Alhajuela Lakes at maximum capacity, providing a buffer should a strong El Niño materialise later in the year. The canal does not anticipate significant disruption before December but is monitoring conditions closely.

That buffer may be tested. Average waiting times at Panama have already surged to 47.9 hours this month – 60% above pre-war baseline levels – and scheduled maintenance on the Gatun Locks in June will cut available daily slots to just 16. Xclusiv Shipbrokers drew clear parallels with the 2023-24 cycle, when drought conditions forced a 46% collapse in panamax lock transits. Despite that disruption, global dry cargo seaborne trade still climbed to an all-time record of 5.37bn metric tonnes, Xclusiv noted.

The dry bulk implications extend well beyond Panama. Xclusiv said an intensely hot Asian summer combined with a weaker Indian monsoon is expected to create a domestic hydropower deficit across the region, generating prompt demand for seaborne thermal coal – a direct benefit to capesize and kamsarmax owners in the Pacific basin. Braemar echoed this, flagging that heat across India, Southeast Asia and China could drive coal consumption materially higher, with a potential super El Niño lowering Indian monsoon rains and keeping temperatures elevated longer.

Agricultural trade patterns are also expected to shift. Xclusiv said a projected fall in Australian wheat yields would push Asian buyers toward longer-haul grain imports from Brazil and Argentina, adding tonne-mile demand for kamsarmax and panamax vessels. Crucially, if canal restrictions force US Gulf grain shipments to reroute around the Cape of Good Hope, transit legs increase by up to 50%, tightening effective fleet supply significantly.

IFCHOR Galbraiths added a further angle, highlighting that El Niño conditions during the third quarter could actually reduce rainfall disruptions in Guinea, potentially supporting stronger bauxite export continuity during the rainy season – a counterintuitive positive for the dry bulk market.

For the LPG sector, Swedish bank SEB sees the weather pattern reinforcing an already exceptional freight environment. US Gulf rates are already at all-time highs, and SEB said the combination of canal tightness and El Niño-driven demand creates an attractive setup for rates to remain supported.

Broker Arrow offered a measured view. The firm noted that NOAA’s forecasts are striking, with a 50% probability of a strong or very strong El Niño event during the fourth quarter, and that the last strong cycle in 2015-16 supported mining operations in eastern Australia and northern Brazil through drought conditions – something that could repeat this year.

“We believe that usually talk about La Niña and El Niño is overstated, as the overall impact is typically very small,” Arrow cautioned. “However, the forecasted strength of this cycle has caught our attention.”