Past few weeks there has been enough coverage about the drought that spreads most throughout the world starting east from China to the west in the USA. The magnitude of the drought can be seen in images showing Asia's largest river dried up and soil developing cracks as the country faces the worst situation since 1865. On the other side of the globe, around 40% of the USA is facing drought impact not only the people around but also the crops in those areas.
This also includes the worst drought situation in Europe, a region already running with heavy problems. Though all these situations might right now be discounted from the world of financial experts the impact of it will be longer and stronger if nature does change its course soon.
Let's look at Sichuan, China which is facing extreme dry conditions. It is the 6th largest contributor to China's GDP. This needs electro round the clock but the problem arises when most of that is generated using water from that very same river. The situation is severe as industrial parks in the region have been closed for more than a week now with no chance of reopening soon as the government priorities supply to the residential area. Another impact of severity is when electric charging stations are shut off which is equivalent to having no fuel at pump stations, especially in a country where EVs have reached a substantial share.
In other regions like USA and Europe, crops have taken the largest hit in decades. This comes at a time when the shortage in crops is growing.
All these impacts are not reversible even if the weather changes quickly. That is why becomes necessary for all to be taking the current relief of the economy and markets from a perspective of reality as many would say it's discounted. But in reality, markets always ignore real-world problems till time those problem creates shocks especially when it is on a fragile base.