Bangladesh’s economy is grappling with intensifying pressure from multiple fronts including the Middle East conflict and a volatile energy market which experts warn could destabilise macroeconomic stability.
Dr. M. Masrur Reaz, chairman of think-tank Policy Exchange Bangladesh, told UNB that recent geopolitical tensions have sparked fresh concerns over energy security, threatening to disrupt power generation, industrial output, and the agricultural sector.
A former World Bank economist, Dr. Reaz said the combination of internal structural weaknesses and external shocks poses a significant challenge for the government.
“Middle East conflict and energy volatility, the escalating military activity involving the US, Israel, and Iran has sent ripples through the international energy market. Analysts fear that a prolonged conflict will lead to severe supply chain disruptions,” he added.
Crucially, uncertainty of free vessel movement in the ‘Strait of Hormuz’ and Qatar Energy has reportedly declared "Force Majeure" on several long-term Liquefied Natural Gas (LNG) supply contracts due to production setbacks.
This development threatens gas supplies to major economies like South Korea, China, and parts of Europe, potentially driving up global oil and gas prices. For an import-dependent nation like Bangladesh, this translates into higher transport costs and immediate inflationary pressure on essential goods, said economic analysts Dr. Reaz.
Domestic supply concerns amidst global volatility, domestic fuel supply has come under scrutiny. Despite reports of long queues at petrol pumps and claims of shortages from pump owners, the government maintains that stocks are sufficient, he pointed out.
Minister for Power, Energy and Mineral Resources, Iqbal Hasan Mahmud Tuku, attributed the pressure to "panic buying." He urged citizens to avoid unnecessary hoarding, assuring that supply would remain steady if demand followed normal patterns.
Economists warn that fuel shortages will hit every sector of the economy.
Gas-dependent sectors such as RMG, textiles, cement, and fertilizer face production cuts, which could shrink export earnings and deplete foreign exchange reserves.
Scarcity of diesel and octane threatens irrigation and mechanized farming, raising fears of reduced food production.
Increased production and transport costs are expected to drive the cost of living even higher. Politicians and Experts warning that the political landscape is also reacting to the crisis, which would be affected living cost of people.
BNP Secretary General Mirza Fakhrul Islam Alamgir warned that the Middle East war could have a devastating impact on the national economy, specifically citing the inevitable rise in oil and commodity prices.
Dr. Debapriya Bhattacharya, Distinguished Fellow at the Centre for Policy Dialogue (CPD), described the energy and banking sectors as the "two lungs" of the economy—both of which are currently in a weakened state.
He emphasized that the government must prioritize four areas: maintaining macroeconomic stability, reforming the banking sector, ensuring energy security, and boosting private investment.
CPD reports a decline in private sector credit flow due to high interest rates. The closure of several industries and the migration of some entrepreneurs have exacerbated the employment crisis.
Furthermore, the banking sector remains high-risk due to a massive volume of non-performing loans (NPLs) and a lack of good governance.
Experts suggest that to mitigate these pressures, Bangladesh must intensify domestic gas exploration, find cost-effective LNG sources, and implement rigorous banking reforms. Whether the current administration can navigate these global and domestic hurdles remains the primary focus of the nation’s economists and business community.