Middle East conflict and risks to Bangladesh economy

As a business leader in Bangladesh, I see a prolonged war in the Middle East not as a distant political development but as a direct and serious economic risk for our country. Our economy is already in a fragile condition. Foreign exchange reserves have come under sustained pressure in recent years, inflation has remained stubbornly high, and overall growth has slowed compared with the strong pace we experienced before the pandemic and subsequent global shocks. In such a situation, a long conflict in the Middle East could deepen existing vulnerabilities and make conditions even more challenging for businesses and households alike.

Bangladesh depends heavily on energy imports from the Middle East. More than 80 percent of our crude oil comes from countries such as Saudi Arabia and the United Arab Emirates, and we import significant volumes of liquefied natural gas from Qatar. If war disrupts oil production or key shipping routes such as the Strait of Hormuz, global fuel prices could rise sharply within a short period. For Bangladesh, that would mean a higher import bill, further pressure on already stretched foreign exchange reserves, and renewed strain on the balance of payments.

Higher fuel costs do not remain confined to the energy sector. They feed directly into electricity tariffs, transport fares and factory operating expenses. The knock-on effect would be broader price increases across the economy, pushing inflation even higher at a time when many families are already struggling to manage daily expenses. If living costs continue to increase, consumers will inevitably cut back on discretionary spending. Lower consumer demand translates into weaker sales for businesses, thinner profit margins and delayed expansion plans.

Remittances remain one of the strongest pillars of our economy. In the fiscal year 2024-25, Bangladesh received around $30 billion in remittances, equivalent to roughly 6.5 percent of gross domestic product and covering nearly half of our import payments. Most of this money comes from workers in Gulf countries such as Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and Oman.

If a prolonged war slows infrastructure development and private investment in the Gulf, many of our migrant workers could face reduced hours, lower wages or job losses. Rural households that depend on these funds would see incomes fall. Banks would face tighter foreign currency liquidity. The taka could come under renewed depreciation pressure.

Investment would also be affected. In periods of global conflict, international investors tend to become cautious. If foreign direct investment declines, new factories, infrastructure projects and technology transfers in Bangladesh could slow. Domestic investors may also delay expansion plans due to uncertainty over fuel prices, exchange rate movements and consumer demand. Prolonged hesitation on both fronts would weigh on medium-term growth prospects.

Employment is closely linked to remittances and investment. If higher shipping costs and weaker global demand affect export orders, factories, particularly in the ready-made garment sector, which earns around $47 billion annually, may reduce production. That could mean fewer overtime opportunities, hiring freezes or even job cuts.

In short, Bangladesh’s economic ties with the Middle East are deep and significant. Energy supplies, remittance flows and trade linkages connect our stability to developments in that region. With our economy already under strain from inflation and external imbalances, a prolonged conflict would likely increase costs, reduce foreign currency inflows, weaken investment sentiment and create employment challenges.

As business leaders, we cannot afford complacency. We must prepare by encouraging diversification of energy sources, expanding export destinations beyond traditional markets, strengthening skills at home and abroad, attracting stable and long-term investment, and building stronger economic buffers. Careful planning, prudent policy and collective action will be essential to protect growth, jobs and economic stability during an increasingly uncertain global period.

The writer is vice-chairman of Newage Group of Industries