El Niño’s ripple effects: How a strengthening pacific pattern is moving different asset classes

Last updated: 28th August 2026 | Author: Cameron MacDonald

El Niño is a periodic climate phenomenon that occurs every 2-7 years, driven by a breakdown in the normal wind and ocean circulation across the tropical pacific. During an El Nino trade winds weaken or even reverse. Without them holding warm water in the west, it moves eastward across the Pacific, raising sea surface temperatures in the central and east ocean. When this occurs, the zone of heavy tropical rainfall and atmospheric convections move with it. The relocation disturbs the broader atmospheric circulation, including the position and strength of the jet streams, effecting weather across the globe.
El Niño may influence markets primarily through higher food and commodity prices, creating potential inflationary pressure that could affect monetary policy, real yields and demand for gold; The Royal Mint Responsibly Sourced Physical Gold ETC (ticker: RMAU) provides physical gold exposure.
Midstream energy may offer a degree of inflation sensitivity where pipeline tariffs and contractual fees adjust with producer prices; the Alerian Midstream Energy Dividend UCITS ETF (ticker: MMLP) provides exposure to North American energy infrastructure companies involved in processing, transportation and storage.
El Niño is typically associated with reduced Atlantic hurricane activity, which could provide a supportive near-term backdrop for catastrophe bonds; the KRC Cat Bond UCITS ETF (ticker: CATB) provides exposure to a diversified portfolio of catastrophe bonds.
For investors, the significance of El Niño is therefore less about the weather event itself and more about its transmission into inflation, monetary policy, energy demand and insured catastrophe losses.

El Niño is a periodic climate phenomenon that occurs every 2-7 years, driven by a breakdown in the normal wind and ocean circulation across the tropical pacific. During an El Nino trade winds weaken or even reverse. Without them holding warm water in the west, it moves eastward across the Pacific, raising sea surface temperatures in the central and east ocean. When this occurs, the zone of heavy tropical rainfall and atmospheric convections move with it. The relocation disturbs the broader atmospheric circulation, including the position and strength of the jet streams, effecting weather across the globe.
El Niño can act as a global food and commodity price shock, potentially increasing inflation over the following 6–16 months.
For gold, the impact depends on whether higher inflation increases demand for a store of value or leads to higher real interest rates that make interest-bearing assets more attractive.
Midstream energy companies may receive a secondary inflation benefit where regulated or contracted transportation fees rise alongside producer prices.
Cat bonds could benefit from reduced Atlantic hurricane activity during El Niño, although a quieter season does not eliminate the risk of significant catastrophe losses.

How might El Niño impact gold?

The clearest academic link between El Niño and markets run through food and other commodities. El Niño typically acts primarily as a food price shock. European Central Bank (ECB) research shows that around a fifth of the variation in global commodity-price inflation are the result of El Niño, which typically can lift real commodity inflation by roughly 3% over 6 to 12 months.[1] Other estimates put the impact on non-energy commodities near 5%, persisting 6 to 16 months.[2] Given the current strength of this current event Goldman Sachs and UniCredit have begun flagging outsized upside risk for global food prices in 2027.[3]

What will this mean for gold? There are two competing factors. Gold is a store of value, and higher inflation can therefore increase demand for gold on that basis. However, higher inflation can also lead central banks to raise interest rates in a bid to temper inflation. Higher rates, particularly higher real yields, can reduce the attractiveness of gold relative to interest-bearing assets. That said, central banks are unlikely to raise rates sharply if any El Niño-driven inflation is expected to be temporary.

Source: Turnleaf Analytics. Data as of 30.06.2026. For illustrative purposes only.

How might midstream energy be affected by inflation?

Less obviously, an El Niño inflation bout could increase the attractiveness of midstream energy companies. Midstream companies typically earn revenue from fees for transporting, processing and storing energy, rather than from movements in underlying oil or gas prices. In many cases, these fees are linked to inflation.

A good example is the Producer Price Index for Finished Goods (PPI-FG). In the US, the Federal Energy Regulatory Commission (FERC) uses changes in PPI-FG to determine annual adjustments to the maximum rates many interstate oil pipelines can charge. From July 2026, the formula is set at PPI-FG minus 0.55 percentage points. This means that, all else equal, higher producer-price inflation can translate into higher allowable pipeline transportation fees

It is important to note that the influence El Niño could have on midstream energy is a secondary one. The PPI-FG will, of course, be influence by a multitude of factors beyond weather. In addition, higher than average winter temperatures could decrease reliance on oil and gas heating.[4] However, the mechanism illustrates how inflation-linked contracts can give parts of the midstream sector a degree of defensive protection during periods of weather driven price pressure.

What could less hurricane risk mean for catastrophe bonds?

El Niño’s wind shear also supresses Atlantic hurricane formation, and NOAA’s 2026 outlook calls for a below-average season – roughly 8-14 named storms, under historical norms.[5]

Hurricanes are one of the major risks covered in cat bond market and El Niño is typically associated with reduced Atlantic hurricane activity. So that can be supportive for catastrophe bonds by lowering the likelihood of hurricane related losses.

But while that is potentially a supportive near-term backdrop is not the fundamental reason to invest in cat bonds. Appeal of Cat Bonds is their ability to generate strong yields with minimal duration or credit risk. Returns are driven by natural events rather than economic or rate cycle. But if the probability of a key peril covered in Cat Bond market is theoretically reduced, that’s supportive of the investment case.

However, a quieter season is not a totally safe one: losses depend on landfall intensity and location, not storm count – Hurricane Andrew, one of the costliest U.S. hurricanes ever, struck Florida during an El Niño year.[6] Consequently, Insurance Linked Securities (ILS) managers describe themselves as “cautious, but optimistic” rather than bullish,[7] and reinsurance pricing has not softened on this outlook alone – concentrated Florida/Gulf exposure means that a single storm could produce an expensive year.[8] Additionally, El Niño redistributes risk rather than eliminating it, increasing the odds of Pacific typhoons, drought, and wildfires in other areas. [9]

« El Niño redistributes risk rather than eliminating it, increasing the odds of Pacific typhoons, drought, and wildfires in other areas.⁹ »

What could this mean for investors?

El Niño has potential consequences for a number of sectors. Gold, food Consumer Price Index releases, and central bank reactions will be vital for gauging sentiment, and not the weather. Midstream energy producers will have to weigh the reduced Gulf storm risk against softer heating demand in the winter months; combined with a lagged inflation tailwind. For cat bonds, a favourable season lowers the odds of losses linked to tropical storms, however it does not eliminate such risks.

KRC Cat Bond UCITS ETF (CATB) is Europe’s first UCITS ETF providing access to the catastrophe bond market, an asset class offering potentially attractive floating rate yields and low correlation to traditional markets.

Managed by King Ridge Capital, a specialist in insurance-linked securities (ILS), the ETF invests in a diversified portfolio of cat bonds that transfer natural disaster risk, such as hurricanes and earthquakes, from insurers to capital markets.

The Alerian Midstream Energy Dividend UCITS ETF (MMLP) is a UCITS compliant Exchange Traded Fund domiciled in Ireland.

The fund seeks to provide diversified exposure to energy companies involved in the processing, transportation and storage of oil, natural gas and natural gas liquids in the US and Canadian markets and includes MLPs and C-corps.

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

The Royal Mint Responsibly Sourced Physical Gold ETC tracks the spot price of physical gold and offers investors access to the gold market, whilst also being shariah compliant. It is the first financial product to be sponsored by The Royal Mint. Uniquely, retail investors can redeem for physical bars and coins stored at The Royal Mint’s secure vault in Llantrisant, Wales. 100% of the gold custodied is backed by London Bullion Market Association (LBMA) post-2019 Good Delivery bars, of which approximately half of the gold is 100% recycled. Following the Russian invasion of Ukraine, all gold bars of Russian origin were removed from the Physical Gold ETC.

Key risks

Thematic ETFs are exposed to a limited number of sectors and thus the investment will be concentrated and may experience high volatility.
Energy infrastructure companies may be subject to specific industry and sector risks such as commodity price fluctuations and decrease in demand for energy during a recession
The return on investment in energy infrastructure companies may be influenced by fluctuations in energy prices or changes to the US economic situation
The fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of gold mining companies
The Sub-Fund’s assets will be actively managed by the investment manager who will have discretion to invest assets to achieve the investment objective. There is no guarantee that the Sub-Fund’s investment objective will be achieved based on the High-yield fixed-income securities are subject to additional risk factors, such as increased possibility of default, illiquidity of the security, and changes in value based on public perception of the issuer.
The Sub-Fund is subject to the risk that a Trigger Event of a particular size/magnitude actually occurs in a designated geographic area and as a result, the Sub-Fund will lose all or a significant portion of the principal it has invested in a particular security and the right to additional interest payments with respect to the security. If multiple Trigger Events occur that impact a significant portion of the SubFund’s portfolio, the Sub-Fund could suffer significant losses
ETC securities are structured as debt securities and not as shares (equity).
Investors’ capital is fully at risk and may not get back the amount originally invested. Exchange rates can have a positive or negative effect on returns.
For a complete overview of all the risks, please refer to the “Risk Factors” in the Prospectus.

IMPORTANT INFORMATION This document is approved for professional use only.

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The content in this document is issued by HANetf Limited (“HANetf”) and approved by Privium Fund Management (UK) Limited (“Privium”). HANetf is an appointed representative of Privium, which is authorised and regulated by the Financial Conduct Authority. The registered office of Privium is The Shard, 24th Floor, 32 London Bridge Street, London, SE1 9SG

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Past performance is not a reliable indicator of future performance. The price of the Products may vary and they do not offer a fixed income. This document may contain forward looking statements including statements regarding our belief or current expectations with regards to the performance of certain assets classes. Forward looking statements are subject to certain risks, uncertainties and assumptions. There can be no assurance that such statements will be accurate and actual results could differ materially from those anticipated in such statements. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. The content of this document is for information purposes and for your internal use only, and does not constitute an investment advice, recommendation, investment research or an offer for sale nor a solicitation of an offer to buy any Product or make any investment.

An investment in an exchange traded product is dependent on the performance of the underlying asset class, less costs, but it is not expected to track that performance exactly. The Products involve numerous risks including among others, general market risks relating to underlying adverse price movements in an Index (for ETFs) or underlying asset class and currency, liquidity, operational, legal and regulatory risks. In addition, in relation to Cryptocurrency ETCs, these are highly volatile digital assets and performance is unpredictable.

This material does not constitute a marketing document. It is not an invitation to invest but to be read for educational purposes only. Past performance and forecasts are not reliable indicators of future results.

[1] https://www.ecb.europa.eu/press/economic-bulletin/focus/2023/html/ecb.ebbox202306_01~36e78cc75e.en.html

[2] https://www.investing.com/analysis/the-el-nino-effect-what-does-it-mean-for-markets-200682680

[3] https://www.lifegate.com/super-el-nino-prices-2028

[4] https://abcnews.com/US/potentially-historic-el-nino-takes-shape-reaching-us/story?id=135615867

[5] https://www.insurancebusinessmag.com/us/news/catastrophe/super-el-nino-will-redraw-global-catastrophe-risk-584352.aspx

[6] https://www.aoml.noaa.gov/hurricane-andrew-25yrs/

[7] https://www.artemis.bm/news/twelve-securis-cautious-but-optimistic-about-el-nino-influence-on-hurricane-season-risk/

[8] https://www.insurancebusinessmag.com/us/news/breaking-news/noaas-quieter-2026-hurricane-outlook-offers-little-relief-for-insurers-576235.aspx

[9] https://www.artemis.bm/news/el-nino-redistribution-of-risk-reinsurance-ils-markets-twelve-securis/

Frequently Asked Questions

How does El Niño affect financial markets?

El Niño primarily affects markets through changes in weather-sensitive commodities, particularly food, which can contribute to higher global commodity-price inflation.

Could El Niño be positive for gold?

Potentially. Higher inflation can increase demand for gold as a store of value, but this effect may be offset if inflation leads to higher interest rates and real yields.

Why do interest rates matter for gold during El Niño?

Gold does not generate income, so higher real interest rates can make interest-bearing assets relatively more attractive and reduce demand for gold.

How could El Niño affect midstream energy companies?

Higher inflation may allow some midstream companies to increase transportation and infrastructure fees where contracts or regulated tariffs are linked to producer-price inflation.

Does a below-average hurricane season mean lower risk for cat bond investors?

Not necessarily. Cat bond losses depend on factors such as storm intensity, location and landfall rather than simply the number

Does El Niño reduce overall catastrophe risk?

No. El Niño can redistribute risk geographically, potentially reducing some Atlantic hurricane risks while increasing the likelihood of other events such as Pacific typhoons, droughts and wildfires.

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El Niño’s ripple effects: How a strengthening pacific pattern is moving different asset classes

Last updated: 28th August 2026 | Author: Cameron MacDonald

﻿ « El Niño redistributes risk rather than eliminating it, increasing the odds of Pacific typhoons, drought, and wildfires in other areas.⁹ »

Frequently Asked Questions

How does El Niño affect financial markets?

Could El Niño be positive for gold?

Why do interest rates matter for gold during El Niño?

How could El Niño affect midstream energy companies?

Does a below-average hurricane season mean lower risk for cat bond investors?

Does El Niño reduce overall catastrophe risk?

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« El Niño redistributes risk rather than eliminating it, increasing the odds of Pacific typhoons, drought, and wildfires in other areas.⁹ »