How The Iran-Israel Conflict Threatens Bangladesh’s Garment Sector And Energy Security – Analysis
As tensions flare in the Middle East with escalating hostilities between Iran and Israel, Bangladesh finds itself precariously placed amid a swirl of global uncertainty. While geographically distant from the epicenter of the crisis, the country is already beginning to feel the economic tremors, particularly in its cornerstone export sector—readymade garments (RMG). The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has sounded an alarm, warning that the conflict could significantly raise the cost of doing business for RMG producers, already burdened by a raft of economic challenges.
According to Mahmud Hasan Khan Babu, the newly elected president of BGMEA, the Israel-Iran confrontation could lead to a sharp uptick in global oil prices. This would inevitably ripple through Bangladesh’s industrial economy, pushing up operational costs, particularly for the energy-intensive RMG sector. “Oil price volatility resulting from the conflict will directly affect the energy and logistics expenses of our industry,” Babu stated. This concern is hardly theoretical. In the aftermath of Israel’s initial airstrikes on Iranian nuclear and military facilities, crude oil benchmarks such as Brent and West Texas Intermediate rose by over 1 percent in a single day—foreshadowing further disruptions.
Babu’s concern is set against an already adverse economic backdrop. Bangladesh’s RMG sector, which contributes more than 80 percent of the country’s export earnings, is under mounting pressure from multiple sources. Reciprocal tariffs imposed by the United States, India’s suspension of transshipment privileges for Bangladeshi goods, rising domestic inflation, increasing worker wages, high bank interest rates, and surging energy costs have collectively created a formidable wall of resistance to sustainable profitability. Against this fraught economic landscape, a protracted Middle Eastern war threatens to become the proverbial last straw.
To counteract these mounting pressures, the BGMEA president outlined a series of initiatives aimed at reducing operational burdens and modernizing the sector’s administrative mechanisms. Notably, a digital platform will soon be launched, streamlining member services and complaint submissions. Babu also committed to reducing the cost of BGMEA services by 25 percent, starting from July 1. He further pledged to advocate for the establishment of a dedicated ministry for the garment sector—an ambitious bid for bureaucratic empowerment.
Finance Adviser Salehuddin Ahmed also weighed in on the situation, asserting that while Bangladesh remains relatively insulated for now, the country is likely to face considerable economic pressure if the war becomes prolonged. “We are not currently experiencing fuel price hikes locally because existing LNG and fertiliser deals were made earlier at lower rates. But if the conflict stretches, those rates will not hold,” Salehuddin remarked following a high-level meeting at the Secretariat in Dhaka.
Indeed, the legacy of earlier conflicts offers sobering parallels. In 2022, amid the Russia-Ukraine war, global fuel and fertiliser prices spiked dramatically, compelling Bangladesh to seek a $4.7 billion loan from the International Monetary Fund due to dwindling foreign exchange reserves. Similar pressures now loom on the horizon. Bangladesh imports most of its liquefied natural gas (LNG) from Middle Eastern nations like Qatar and Oman. A disruption in maritime routes—especially through the strategic Strait of Hormuz, where nearly 20 percent of global oil traffic passes—could upend these vital supply lines.
Complicating matters further is the potential militarization of the Strait. Iran has threatened to close this critical chokepoint in retaliation against Israeli aggression. Such a move would not only interrupt energy flows but also imperil Bangladesh’s broader trade logistics. Closure of the Strait could cause severe delays in RMG shipments, jeopardizing timely delivery to global retailers and eroding Bangladesh’s competitive edge in the apparel marketplace.
The aviation sector is already adjusting to the war’s fallout. Biman Bangladesh Airlines has rerouted flights to Saudi Arabia and Kuwait to avoid Iranian airspace, adding approximately 10 to 15 minutes of flight time. While minimal in terms of duration, these route changes often entail higher fuel costs and scheduling complexities. US-Bangla Airlines, the country’s largest private carrier, reported no changes since it had not been using Iranian airspace. However, other regional airlines such as Air Arabia have suspended connections between Bangladesh and Iran.
Hazrat Shahjalal International Airport’s Executive Director, Group Captain Ragib Samad, confirmed the rerouting but downplayed its current impact on passenger flows. However, he acknowledged that the UAE has imposed strict boarding restrictions for transit passengers traveling to Iran, Israel, Jordan, Iraq, and Syria. These airspace closures represent one of the most significant disruptions to Middle Eastern aviation in recent memory, with Iraq, Iran, and Jordan all sealing their skies to civilian aircraft amid growing security concerns.
While Iran is not a primary destination for Bangladeshi migrant workers—the community there is estimated at only around 2,000—the broader Middle Eastern corridor is vital for remittance flows and trade. The ongoing instability threatens not only Bangladesh’s trade routes but also the safety and livelihood of its diaspora in the region.
Despite the escalating geopolitical tension, Bangladesh’s procurement apparatus remains operational for the moment. During the recent committee meeting on economic affairs, proposals were approved for importing one LNG cargo from the U.S.-based Excelerate Energy for Tk 6.12 billion and 30,000 tonnes of urea fertiliser from KAFCO at a unit price of $383.25. Salehuddin confirmed that these shipments are being secured at previously negotiated prices, providing a brief respite amid global market turbulence. However, he warned that any future procurement might be subjected to new, higher pricing tiers if the conflict continues.
In the broader context, Bangladesh’s vulnerability lies in its dependence on fossil fuels and maritime import routes, a fragility exacerbated by global conflict. While the country does not source oil directly from Iran due to international sanctions, it remains entangled in the wider network of global energy trade. Any escalation that affects the Middle East’s production capacity or export logistics will inevitably reverberate across Bangladesh’s economy, from factory floors to farm fields.
The Iran-Israel conflict has already caused a spike in crude oil prices and rattled financial markets. The stakes are high not just for the two nations directly involved but for the entire global supply chain. For Bangladesh—a country still recovering from the economic aftershocks of the pandemic and the Ukraine war—this latest flashpoint presents another grave test of resilience.
As government officials continue to monitor developments, the mood remains cautiously watchful. Salehuddin encapsulated this sentiment aptly: “We are observing the situation. If the war continues, we will certainly be affected… I don’t think the war will last long.” Yet for a nation perched delicately on the edges of global commerce, even a short conflict may bring enduring consequences.
