New Delhi [India], March 14 (ANI): Weather patterns along with ongoing geopolitical risks affecting global energy prices could adversely impact inflation in 2026, according to a report by State Bank of India.

The report highlighted that the recent forecasts for global weather patterns indicate a possible build-up of El Nino in 2026.

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It stated "Weather patterns along with ongoing geopolitical risk affecting the energy prices can adversely impact inflation in 2026"

According to the report, the latest trends in the Nino 3.4 Sea Surface Temperature (SST) Index show that the El Nino-Southern Oscillation is currently in a neutral phase but may transition to a positive phase either in 2026 or in the latter part of 2026.

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The report noted that the Indian monsoon is influenced by both ENSO (El Nino-Southern Oscillation) and movements of the Indian Ocean Dipole (IOD). It explained that the occurrence of El Nino along with a negative IOD typically leads to a deficient monsoon.

Currently, the IOD is in a negative phase, and forecasts suggest that the probability of El Nino forming ranges between 40-60 per cent.

Such weather developments could have a significant impact on agriculture and food supply, which in turn may influence inflation dynamics in India.

Apart from weather-related risks, the report also pointed to geopolitical developments affecting global commodity markets. It noted that despite claims from the United States and its allies, the ongoing war has continued and has resulted in a near shutdown of maritime trade.

The report said that the conflict has also disrupted production, while the lack of adequate storage capacity has resulted in oil being held on water, often referred to as "oil on water". This situation has added pressure on commodity markets.

According to the report, the disruption has intensified speculation in commodity markets while also reflecting genuine demand from multiple regions.

The report emphasised that the importance of communication and coordinated action has increased in the current global environment. It suggested that alternative arrangements for energy security and rational measures to curb energy usage could help mitigate the adverse effects.

It stated "the unwarranted consequences of a war that benefits and enriches a select few, while raising hardships for the world at large by multiple times, its wrath most evident on the fringe". (ANI)

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