The Strait of Hormuz closure has renewed concerns over Bangladesh’s energy security, threatening to drive up global oil and liquefied natural gas (LNG) prices at a time when the country remains heavily dependent on imported fuel. Although officials say domestic fuel stocks are sufficient in the short term, the disruption to one of the world’s most important energy shipping routes could increase import costs, place fresh pressure on public finances and complicate efforts to keep electricity and fuel supplies stable.
The Strait of Hormuz carries a significant share of the world’s crude oil and LNG exports. Any prolonged disruption to traffic through the waterway typically reverberates across international energy markets, pushing up shipping costs and benchmark oil prices. For Bangladesh, which imports most of its petroleum products and LNG, the closure presents an immediate economic risk despite recent progress in reducing procurement costs.
Officials at the Bangladesh Petroleum Corporation (BPC) said the country’s fuel reserves remain stable for now. As of Sunday, BPC held around 414,000 tonnes of diesel, enough to meet domestic demand for approximately 34 days, while octane reserves were sufficient for around 40 days. Between eight and ten diesel cargoes are also scheduled to arrive this month, providing an additional cushion against any immediate supply disruption.
The latest uncertainty comes after Bangladesh had begun to benefit from easing fuel costs following an earlier period of geopolitical tension. During previous regional conflicts, BPC paid about 45 million US dollars for a 30,000-tonne shipment of refined diesel. That cost had recently fallen to around 32 million US dollars as international prices eased.
To strengthen supply security, the government has almost completed a government-to-government procurement programme covering 1.6 million tonnes of fuel through December. The agreement, negotiated with four to five international suppliers, secures lower shipping premiums than conventional open tenders and is expected to save the government around Tk7 billion.
The procurement framework was finalised during negotiations in Singapore late last month, attended by Energy Minister Iqbal Hasan Mahmud and representatives from ten international fuel suppliers. Discussions centred largely on freight and handling premiums.
According to an official familiar with the negotiations, nine of the ten companies initially sought premiums exceeding 14 US dollars. However, Indian Oil Corporation Limited offered a premium of 9.5 US dollars, prompting suppliers including Unipec and PetroChina to match the lower rate. The agreement marks a notable reduction from the 13.5 US dollar premium Bangladesh paid through open tenders between June and August. Officials said that under current wartime shipping conditions, every one-cent reduction in the premium saves approximately Tk8.2 million.
While liquid fuel procurement has become more cost-efficient, Bangladesh’s LNG imports remain significantly more exposed to international market volatility.
Since March, long-term LNG supply contracts have remained stalled, forcing Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) to purchase cargoes entirely from the spot market, where prices fluctuate sharply in response to geopolitical developments.
A K M Mizanur Rahman, Director of Finance at Petrobangla, said the closure of the Strait of Hormuz would inevitably increase both oil and gas prices, creating fresh concerns for the national economy.
He noted that spot LNG prices had recently fallen to between 16 and 17 US dollars per unit following a temporary ceasefire, compared with around 28 US dollars paid in March. However, he warned that the market outlook had once again become highly uncertain.
International oil markets were already showing signs of renewed pressure. Brent crude closed at 76.10 US dollars a barrel on Friday, well below the 114 US dollar peak recorded during earlier periods of conflict, but analysts expect fresh volatility and possible price increases when trading resumes if the disruption continues.
The financial strain on Bangladesh’s energy sector has also intensified. Over the past four months, the government has not released fuel subsidies to BPC, forcing the corporation to divert development funds earmarked for major infrastructure projects, including the Eastern Refinery-2 project, to finance day-to-day fuel imports.
According to officials, this emergency financing has created a funding gap of around Tk210 billion between March and June. Despite repeatedly requesting subsidy payments from the Finance Division, BPC has yet to receive the outstanding funds.
Meanwhile, the proposed 1.6 million-tonne fuel procurement programme, valued at more than Tk180 billion under the Platts Singapore pricing formula, has received approval from BPC and is awaiting final clearance from the Cabinet Committee on Government Purchase.
Despite mounting uncertainty across global energy markets, officials believe Bangladesh is better prepared than during previous supply disruptions. Lessons learned from the severe market turbulence earlier this year have prompted authorities to strengthen contingency planning, maintain higher fuel inventories and place storage depots on heightened alert.
Energy officials remain cautiously optimistic that these preparations, combined with diversified procurement strategies, will help protect Bangladesh’s fuel supply and electricity system from the worst effects of any prolonged disruption in global energy trade. At the same time, they acknowledge that a sustained closure of the Strait of Hormuz would continue to pose significant risks to fuel prices, energy subsidies and the country’s broader economic stability.
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