The rapidly escalating tensions in the Middle East following joint military strikes by Israel and the United States against Iran have triggered widespread geopolitical uncertainty, raising concerns far beyond the region.
If the conflict persists, its consequences will extend beyond regional security, potentially disrupting global energy markets, shipping routes, insurance costs, currency stability, and international trade flows.
For Bangladesh, whose economy relies heavily on imported energy, remittance inflows from the Middle East, and export-driven manufacturing, particularly garments, the impact could be immediate and severe.
Rising fuel prices, pressure on foreign exchange reserves, inflationary stress, and uncertainty in remittance inflows threaten to undermine the fragile economic confidence that had begun to recover.
The situation escalated further when Iran’s semi-official Tasnim News Agency reported warnings issued by the Islamic Revolutionary Guard Corps to vessels operating near the Strait of Hormuz, cautioning that the vital maritime route could be closed to shipping.
Similar information was reported by Reuters, citing European naval officials monitoring the situation.
Although Tehran has not formally declared a closure, the threat alone has heightened alarm in global energy markets.
The Strait of Hormuz is one of the most critical energy corridors in the world. It serves as the only sea route connecting the Persian Gulf to the open ocean through the Gulf of Oman and the Arabian Sea, bordered by Iran on one side and Oman and the United Arab Emirates on the other.
Approximately one-fifth of the world’s oil supply—around 20 million barrels per day—passes through this narrow waterway.
LNG worries
A significant portion of global liquefied natural gas shipments also depends on this route. Any disruption, even temporary, can cause immediate price shocks in international markets. Brent crude prices have already climbed to around $73 per barrel amid rising tensions, reflecting growing market anxiety.
Forecasts from Goldman Sachs suggest that prolonged disruption could push oil prices above $100 per barrel, while projections from Equirus Securities indicate a possible range between $95 and $110 per barrel under severe supply constraints.
Such a surge would have profound consequences for energy-importing countries, particularly developing economies like Bangladesh, where higher energy costs translate directly into increased import bills, currency pressure, and inflation.
Bangladesh currently spends between $6 billion and $7 billion annually on fuel imports.
A $5 increase in global oil prices could add an estimated $400 million to $500 million in additional expenditure, while a $20 to $30 increase could raise costs by several billion dollars.
This would immediately strain foreign exchange reserves, weaken the Bangladeshi taka against the dollar, increase government subsidy burdens, and raise electricity generation costs.
Higher fuel prices would also increase transportation costs, triggering inflation across all sectors, from agriculture to manufacturing. In an economy already grappling with elevated inflation, rising fuel costs could worsen the cost-of-living crisis and reduce consumer purchasing power.
Bangladesh’s export sector, which relies heavily on ready-made garments accounting for approximately 84% of total exports, is equally vulnerable. Rising fuel costs increase production expenses, reducing competitiveness in global markets.
Smaller and medium-sized exporters face the greatest risk, as they have less capacity to absorb cost increases.
In addition, disruptions in key maritime trade routes such as the Suez Canal and the Red Sea could force cargo vessels to reroute around the Cape of Good Hope.
Such detours would increase shipping times by 10 to 15 days and raise freight costs by up to 40%, disrupting supply chains and delivery schedules.
Prolonged conflict could also weaken consumer confidence in key markets such as Europe and North America, reducing demand for non-essential products, including garments exported by Bangladesh.
Iran ties
Despite the severity of the conflict, Bangladesh’s direct trade with Iran remains limited due to longstanding international sanctions and banking restrictions.
According to data from Bangladesh Bank and the Export Promotion Bureau, bilateral trade between the two countries is relatively small.
Bangladesh exported approximately $10.9 million worth of goods to Iran in FY25, primarily jute yarn and garments, while imports from Iran totaled only around $500,000.
Although direct exposure is limited, indirect impacts through global markets, shipping routes, and financial systems remain a major concern.
Remittance inflows represent another critical vulnerability. A large portion of Bangladesh’s remittances originates from Middle Eastern countries such as Saudi Arabia, the Qatar, Kuwait, and Bahrain.
Prolonged conflict could disrupt economic activity in these countries, particularly in construction and services, where many Bangladeshi migrant workers are employed.
Project delays, job losses, or forced repatriation could reduce remittance inflows significantly.
Lower remittance earnings would further strain Bangladesh’s foreign exchange reserves and accelerate currency depreciation.
During times of geopolitical uncertainty, investors typically move toward safe-haven assets such as the US dollar and gold, strengthening the dollar and increasing import costs for countries like Bangladesh, creating a double shock.
Shipping and logistics sectors also face mounting risks. Increased geopolitical instability raises insurance premiums for vessels, increases shipping delays, and disrupts global supply chains.
Bangladesh, which relies heavily on imported liquefied petroleum gas and other fuels, remains particularly vulnerable due to its dependence on foreign energy sources.
Any disruption in LPG supply chains would likely lead to price increases for consumers and businesses alike, further intensifying inflationary pressures.
At the same time, the crisis presents a critical test of Bangladesh’s economic resilience and diplomatic strategy.
The country maintains important economic ties with the United States, Middle Eastern energy suppliers, and regional partners.
Preserving diplomatic balance will be essential to protect energy security, safeguard overseas employment opportunities, and ensure continued economic stability.
To mitigate the risks, Bangladesh will need to strengthen strategic preparedness.
Diversifying energy sources, expanding long-term fuel supply agreements, increasing renewable energy investment, strengthening foreign exchange reserve management, and diversifying export markets will be essential steps.
Ensuring continued remittance inflows through policy incentives and protecting migrant worker interests will also be critical.