Bangladesh's inflation woes heightened by Iran war fallout

The ongoing conflict between the US, Israel, and Iran has intensified inflationary pressures in Bangladesh, compounding an already challenging economic landscape. With inflation hitting a 10-month high in February 2026 and rising for four consecutive months, the war's impact on energy markets and global supply chains threatens to undermine the new government's recovery efforts and the central bank's plans to cut interest rates.

Bangladesh, which imports nearly all its fuel—including crude oil, refined petroleum, and liquefied natural gas (LNG)—faces immediate risks from surging energy prices. Global oil prices have climbed to $119 per barrel, up from $72 a year ago, as Iran's blockade of the Strait of Hormuz disrupted critical shipping routes. Major shipping lines have suspended cargo operations between the Gulf and Bangladesh, triggering panic buying, fuel rationing, and long queues at stations nationwide.

Higher fuel costs are likely to increase electricity generation expenses, transportation costs, and industrial production costs, further straining the government's energy subsidy program.

The conflict also threatens to destabilize Bangladesh's foreign exchange reserves. A stronger US dollar, driven by global uncertainty, raises import costs and exacerbates inflation. Additionally, remittances from Bangladesh's 8.6 million migrant workers in the Middle East—accounting for 75% of overseas employment—could decline if Gulf economies slow, worsening the country's external balance.

Economists warn that prolonged geopolitical tensions could trigger a chain reaction: disrupted trade flows, weakened export competitiveness, and higher logistics costs. To mitigate risks, experts urge contingency planning, including diversifying energy imports, accelerating renewable energy investments, and leveraging foreign financing to stabilize reserves. The Centre for Policy Dialogue (CPD) has emphasized the need for strategic fuel reserves and fiscal measures to address energy insecurity.

As the war's duration remains uncertain, Bangladesh's economy faces heightened vulnerability, with inflation, foreign exchange pressures, and energy supply risks converging to challenge growth prospects.