An escalating conflict in the fuel-hub Middle East is emerging as a major risk to Bangladesh's energy security with potential ripple effects across the broader economy.
Suggesting a number of must-dos to save the situation, a new assessment warns that disruptions to key fuel-supply routes could intensify existing vulnerabilities and trigger inflationary and growth-related pressures.
As global energy markets confront renewed instability, Bangladesh's heavy reliance on LNG import, particularly from the Gulf, has left it exposed to a "deepening supply shock with far-reaching consequences".
The South Asian Network on Economic Modeling (SANEM), in its evaluation, has observed that the developments in the Gulf have significantly affected energy production, tanker movements and maritime security.
In a statement issued Thursday on its situation assessment, the think-tank says the unprecedented closure of the Strait of Hormuz has triggered a major supply shock, putting nearly 20 per cent of global liquefied natural gas (LNG) shipments at risk, while production setbacks in Qatar have further intensified the crisis.
Bangladesh is particularly vulnerable as around 72 per cent of its LNG imports come from Qatar and the United Arab Emirates-supply chains that are now effectively disrupted.
The assessment highlights that this shock comes at a time when the country is already facing a structural gas deficit due to declining domestic production.
The SANEM analysis identifies three major transmission channels - energy, remittance, and trade and logistics - through which the conflict could affect the Bangladesh economy.
It warns that rising global fuel prices would increase import and production costs, widen the country's current-account deficit and exacerbate inflationary pressures.
Using the Global Trade Analysis Project computable general equilibrium model, the study estimates that a 40-percent increase in global crude-oil prices and a 50-percent rise in LNG prices could reduce Bangladesh's real GDP by around 1.2 per cent.
Exports may decline about 2.0 per cent while imports could fall 1.5 per cent.
Inflationary pressures are expected to intensify, with consumer prices likely to rise by nearly 4.0 per cent and real wages projected to fall by close to 1.0 per cent, indicating a weakening of household purchasing power.
Sectoral impacts are also significant, with output in the readymade garment sector expected to decline by roughly 1.5 per cent, transport by almost 3.0 per cent, agriculture around 1.0 per cent, and energy-intensive manufacturing about 2.5 per cent.
The study observes that government response, including austerity measures and fuel rationing, has drawn mixed reactions due to inconsistencies between official claims and the situation on the ground.
To address the crisis, SANEM recommends accelerating the development of renewable energy, particularly rooftop solar, by streamlining net-metering approvals and encouraging private-sector participation.
It also calls for increased budgetary allocations and fiscal incentives, including tax exemptions on renewable-energy equipment and improved access to affordable financing.
On short-term dos, the report stresses the need to diversify energy-import sources through multi-country contracts and bilateral arrangements for crude oil, refined fuel and LNG.
It also underscores the importance of building a strategic national reserve to cushion against future global supply disruptions.
For immediate crisis management, the study suggests introducing digital fuel- rationing systems, shifting industrial activities to off-peak hours and prioritising fuel allocation to high-value sectors such as agriculture and export-oriented industries. In the medium term, SANEM underscores the need to accelerate both onshore and offshore gas exploration to ensure reliable baseload power generation and reduce dependence on volatile global LNG markets.
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