by Asif Showkat Kallol (Dhaka Bureau)
Bangladesh may confront a cascade of economic challenges if the war involving Iran escalates or drags on, analysts and former officials say, warning that turmoil across the Middle East already shows early signs of affecting the country’s fragile economy.
Economists identify seven immediate risks:
1. Rising import and export costs.
2. A slowdown in labour migration and remittances.
3. Higher inflation.
4. Depreciation of the taka and pressure on foreign reserves.
5. Potential energy shortages and disruptions to electricity production.
6. Setbacks in fertiliser imports and
7. Slower investment and development.
The conflict between Iran, Israel, and the United States has already begun to ripple through key sectors of Bangladesh’s economy, according to analysts, particularly energy and overseas employment.
Former ambassador Humayun Kabir warned that Bangladesh’s heavy reliance on the Middle East for labour markets and energy imports leaves it exposed. More than 8 million Bangladeshi workers live and work in the region, and a widening conflict could jeopardise both their security and their income.
‘If tensions escalate further, many migrant workers may lose their jobs or feel compelled to return home,’ he said, adding that disruptions in the Strait of Hormuz could sharply raise energy transport costs through higher insurance premiums and shipping risks.
Bangladesh also relies on fertiliser imports from Saudi Arabia, Qatar, and the United Arab Emirates. Any disruption to trade routes could affect agricultural production in a country where farming remains a major pillar of the economy.
Economists say instability around the Strait of Hormuz- a critical global energy chokepoint- has already begun to push up oil prices and shipping costs. Increased risks to air and sea routes have driven up freight and insurance rates, raising the cost of importing essential goods.
More than 8.6 million Bangladeshis work across Middle Eastern countries. If the conflict deepens, job opportunities could shrink and remittance inflows- a crucial lifeline for the economy- may slow.
Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, said the shock to Bangladesh may prove ‘less like a storm and more like an earthquake.’
‘The biggest impact may come through the global oil market,’ he said. Before the war, Brent crude traded at around $72 a barrel; prices have since climbed above $100.
Bangladesh depends heavily on imported energy, from crude oil to refined petroleum and liquefied natural gas. Rising global prices therefore translate quickly into higher import bills.
Shipping disruptions have already emerged. Several major shipping companies have temporarily suspended cargo bookings between the Indian subcontinent and Gulf countries, raising concerns about trade delays and supply shortages.
Higher fuel costs would increase electricity generation expenses, transport costs and industrial production costs, forcing the government either to expand subsidies or raise domestic energy prices.
With Bangladesh already experiencing elevated inflation, economists warn that rising fuel and transport costs could further push up the price of food and essential goods. At the same time, growing demand for dollars to finance energy imports may place additional pressure on the country’s foreign exchange reserves and weaken the taka.
As the conflict unfolds, Bangladesh now faces a difficult balancing act between economic stability and global uncertainty.
The Author:
Asif Showkat Kallol. Works for a German-based online outlet, The Mirror Asia, and as Head of News and Contributor, Pressenza- Dhaka Bureau.
