Economy Under Pressure as Mideast War Fuels Fears

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Bangladesh’s economy is facing mounting pressure on several fronts as the conflict in the Middle East and growing volatility in global energy markets raise fresh concerns over inflation, industrial output and overall macroeconomic stability, economists have warned.
Dr M. Masrur Reaz, chairman of Policy Exchange Bangladesh, said the latest geopolitical tensions have intensified fears over energy security, with the potential to disrupt electricity generation, industrial production and agriculture.
A former World Bank economist, Dr Reaz said the combination of domestic structural weaknesses and external shocks is creating a serious challenge for the government.
“The Middle East conflict and energy volatility are causing deep concern. The escalating military activity involving the United States, Israel and Iran has already sent ripples through the global energy market. A prolonged conflict could trigger severe supply chain disruptions,” he said.
He noted that uncertainty over the free movement of vessels through the Strait of Hormuz, along with reports that Qatar Energy has declared force majeure on several long-term liquefied natural gas (LNG) contracts due to production setbacks, could further intensify the crisis.
Such developments, he said, could disrupt gas supplies to major economies such as South Korea, China and parts of Europe, pushing up global oil and gas prices.
For an import-dependent country like Bangladesh, that would mean higher fuel and transport costs, along with immediate inflationary pressure on essential goods.
Domestic supply fears grow
At home, concerns over fuel supply have also come under renewed scrutiny.
Despite reports of long queues at petrol pumps and claims of shortages from pump owners, the government has maintained that fuel stocks remain adequate.
Power, Energy and Mineral Resources Adviser Iqbal Hasan Mahmud Tuku attributed the pressure to panic buying and urged people not to hoard fuel unnecessarily, saying supplies would remain stable if demand stayed within normal levels.
Economists, however, warned that any prolonged fuel shortage would have far-reaching consequences across the economy.
Gas-dependent sectors such as ready-made garments, textiles, cement and fertiliser could face production cuts, potentially reducing export earnings and putting further strain on foreign exchange reserves.
A shortage of diesel and octane could also affect irrigation and mechanised farming, raising concerns over lower food production and increased pressure on the agricultural sector.
Higher production and transport costs are also expected to drive up the cost of living even further, adding to the burden on ordinary consumers.
Political and economic concern
The growing crisis has also triggered political concern.
BNP Secretary General Mirza Fakhrul Islam Alamgir warned that the war in the Middle East could have a severe impact on Bangladesh’s economy, particularly through rising oil and commodity prices.
Dr Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue, described the energy and banking sectors as the “two lungs” of the economy, both of which are currently under serious strain.
He said the government must now focus on four priority areas: maintaining macroeconomic stability, reforming the banking sector, ensuring energy security and encouraging private investment.
According to CPD, private sector credit growth has slowed due to high interest rates, while the closure of several industries and the relocation of some entrepreneurs have worsened the employment situation.
The banking sector, meanwhile, remains under pressure because of a large volume of non-performing loans and persistent governance weaknesses.
Call for urgent reforms
Experts say Bangladesh must move quickly to reduce its vulnerability by intensifying domestic gas exploration, identifying more affordable LNG sources and accelerating reforms in the banking sector.
With both global and domestic risks mounting, economists and business leaders say the government’s ability to manage these overlapping pressures will be critical in the months ahead.