Middle East crisis and Bangladesh's economic challenges

The ongoing conflict involving the United States, Israel and Iran is not just a regional issue. It has created a major crisis affecting the lives of 8.3 billion people around the world. People in both developed and developing countries are paying the price for this war, which has been driven by Trump and Netanyahu.

Was this war inevitable? The answer is clearly no. Most people opposed it. The United States and Israel received no support from their allies. Even NATO is now on the brink of collapse, as none of its member countries wanted to join what they saw as an unjust war.

Twenty percent of the world’s fuel oil and one-third of its liquefied natural gas (LNG) pass through the Strait of Hormuz near Iran. This vital route has been partly or completely closed since February 28. As a result, global prices of fuel oil and LNG have risen sharply. The situation has worsened because oil and LNG production facilities in the Middle East have been shut down or forced to reduce output. Consequently, like other countries, Bangladesh has been badly affected.

The greatest concern for Bangladesh is the impact on energy supplies. Around 95 percent of the country’s fuel oil and a large share of its LNG come from the Middle East. As an import-dependent nation, every ten-dollar increase in price adds an extra $70–$80 million to the monthly energy import bill. This is directly hitting transport, electricity and agriculture. Transport fares have gone up, the prices of daily essentials are rising, and load shedding is disrupting agricultural and industrial production. If farmers cannot get enough irrigation and fertiliser, food security could be threatened. Recent natural disasters have already damaged crops in low-lying areas, and the government is reported to be providing some allowances for three months to help affected farmers.

The Middle East crisis is also adding to already high inflation. The central bank has warned that inflation may soon cross double digits again. Together, inflation and power shortages are making life increasingly difficult for ordinary people.

The war is also bad news for the garment industry, Bangladesh’s main export sector. With key routes such as the Red Sea and Suez Canal becoming unsafe, shipping delays have increased and freight costs have risen. According to BGMEA, energy shortages are disrupting production while buyers are shifting orders to other countries. This is harming the country’s main export earner and leading to job losses, raising fears of growing poverty.

If the current deadlock in the Middle East continues, the country’s overall energy situation could become even more serious. The Middle East is also an important source of Bangladesh’s foreign exchange. Remittances from expatriate workers form the backbone of the country’s reserves, with roughly half coming from Middle Eastern countries. Although nations such as Saudi Arabia, the United Arab Emirates and Qatar are not directly involved in the fighting, regional instability has slowed their economies. This threatens job opportunities for Bangladeshi workers and could reduce their earnings. The Asian Development Bank has cautioned that the crisis may hinder the flow of remittances to Bangladesh.

If the war ends, however, it could create significant opportunities for Bangladesh. Rebuilding damaged infrastructure across the Middle East will require a huge workforce, including many construction workers. Bangladesh could supply much of this labour. With an eye on the future, the country should now begin preparing by training and sending skilled construction workers.

It is essential to ensure uninterrupted gas and electricity supplies to factories so that the export sector remains safe. Although Bangladesh has limited options to handle this crisis, strategic planning is vital. The government has already introduced some energy-saving measures, such as shifting office hours from 9 am to 4 pm and requiring shops to close after 7 pm. It is also trying to import energy from alternative sources. By August, around 300 megawatts of electricity from the Rooppur Nuclear Power Plant are expected to add to the national grid.

These steps offer some relief. However, for a lasting solution, Bangladesh must move away from its heavy dependence on imported energy and focus instead on developing its own natural gas resources and renewable energy. It should also look for new labour markets for remittances and diversify its export products. Experts have recommended these steps for a long time. This critical moment is the right time to begin new initiatives.

Writer: Anwar Faruk Talukder is banker and economic analyst

The article was originally published in the print and online editions of The Daily Samakal and has been rewritten for the English version by Mohammed Humayun Kabir, Assistant News Editor.