Escalating tensions in the Middle East could pose serious economic risks for Bangladesh by pushing up global energy prices, raising import costs, and weakening export competitiveness, according to a new report from the Policy Research Institute (PRI).
The report, titled ‘Bangladesh Monthly Macroeconomic Insights (January-February 2026)’, warned that geopolitical instability, particularly potential disruptions in global oil supply, could threaten Bangladesh’s fragile economic recovery in both the short and medium term.
Bangladesh is heavily reliant on imported fuel to meet domestic energy demand, making it highly vulnerable to fluctuations in global prices. The country’s annual energy import bill stands at about $12 billion, said the PRI.
Even modest increases in oil prices could significantly strain the economy: a $10 per barrel rise could add around $900 million to energy import costs, while a $20 increase could raise the bill by nearly $1.8 billion. Following the escalation of tensions, Brent crude prices jumped to $92 per barrel, about 42 per cent higher than pre-war levels, while liquefied natural gas (LNG) prices in Europe surged nearly 70 per cent.
Higher energy costs would increase Bangladesh’s demand for US dollars, putting pressure on the exchange rate and potentially reducing foreign exchange reserves. PRI highlighted the strategic importance of the Strait of Hormuz, through which roughly 20 per cent of global oil trade passes, noting that any disruption could trigger a severe global energy shock.
In extreme scenarios, oil prices could exceed $130 per barrel, raising production and transportation costs worldwide.
Bangladesh may also face energy rationing for industries, potentially affecting industrial output and economic growth.
The report also cautioned that a prolonged Middle East conflict could weaken global growth, reducing demand for Bangladesh’s exports, particularly in the ready-made garment sector.
Export earnings fell 3.15 per cent year-on-year to $31.9 billion during July-February FY26, reflecting weak global demand and heightened competition.
Bangladesh’s external sector remains fragile, despite foreign exchange reserves improving to $30.4 billion. Rising external debt - from $104 billion in FY24 to $113 billion in FY25, and projected $121 billion in FY26 - could intensify repayment pressures if import costs spike.
The PRI report also noted domestic economic challenges: GDP growth slowed to 3.49 per cent in FY25, while inflation remained relatively high at 8.58 per cent in January 2026.
Given these risks, the PRI stressed the need for export diversification, prudent macroeconomic management, and stronger policy reforms to enhance Bangladesh’s resilience against potential global shocks.
