Panama Canal auction prices for the core busy shipping lane hit a record high as lower water levels tied to a worsening El Nino pattern and higher shipping demand from the Iran conflict both weighed on capacity.

According to Sina Finance, the average daily auction quota price for August transit slots at the canal's main locks was about $1.1 million this month, more than 16 times the average a year earlier. Since the U.S.-Israeli airstrikes on Iran on February 28 and the forced closure of the Strait of Hormuz, canal transit fees have kept rising.

The U.S. National Oceanic and Atmospheric Administration said the El Nino pattern has gradually developed since June and has been strengthening. The weather event can warm Pacific surface waters and may cause widespread severe drought and warmer winter temperatures, with this year's intensity possibly above normal.

Argus Americas freight pricing chief Ross Griffiths said, "The problem now is that water levels keep falling, and that should not happen between May and December."

Argus data showed that in recent weeks, average auction prices for the canal's large locks, which can handle big vessels, briefly reached $2.5 million, a record high for both lock categories.