The explosions in Tehran and missile strikes in Beersheba might feel worlds away from the bustling streets of Dhaka or the garment factories of Chittagong. But as the Iran-Israel war escalates—with the U.S. poised to decide on military involvement within days—Bangladesh faces tangible economic tremors. This isn’t just geopolitics; it’s a looming storm for inflation-wracked households, export-dependent industries, and the nation’s financial stability. While Bangladesh isn’t on the front lines, the fallout from this conflict could unravel years of economic progress.

Why This Conflict Is Different

Israel’s targeted strikes on Iran’s nuclear facilities—like Natanz and the Arak reactor—marked a dangerous shift from proxy warfare to direct state-on-state aggression. Iran’s retaliation, including a missile strike on Israel’s Soroka Medical Centre (which it claims targeted a military intelligence hub), has killed 24 Israelis and over 600 Iranians. The U.S. now stands at a crossroads: President Trump’s upcoming decision on military action could turn this regional war into a global flashpoint. Analysts warn Iran has “no exit strategy,” with both sides trapped in a cycle of escalation that could draw in major powers.

The Economic Channels Hitting Bangladesh

Oil Prices and Inflation
Bangladesh imports 90% of its crude oil from the Gulf. With Brent crude already spiking 1% after initial Israeli strikes, further surges are inevitable if the U.S. joins the conflict. This isn’t abstract:

• Transport and production costs will soar for everything from textiles to agriculture.
• Inflation, already in double digits, could accelerate as fuel hikes cascade through supply chains5.
  As Prime Minister Sheikh Hasina cautioned, instability in global markets “may increase transportation costs and disrupt commodity supply chains,” directly impacting exporters.

The Garment Sector’s Perfect Storm
Ready-made garments (RMG) account for 84% of Bangladesh’s exports. Here’s how the conflict threatens this lifeline:

1. Energy costs: Factories face steep rises in electricity and generator fuel expenses.
2. Shipping disruptions: Attacks near the Strait of Hormuz or Suez Canal could delay shipments and raise freight costs by 15–30%.
3. Buyer hesitancy: European retailers may shift orders to less volatile regions if war escalates.
   Mahmud Hasan Khan Babu of BGMEA puts it bluntly: “Oil price volatility will cripple our competitiveness at a time when we’re already battling high production costs and falling orders”.

Remittances and Reserves
Over 1 million Bangladeshis work in the Middle East. If conflict spreads:

• Remittance flows from Saudi Arabia, UAE, and Qatar could shrink as construction halts and oil economies wobble.
• Foreign reserves, already under pressure, face further strain from rising import bills and currency volatility.

Government Responses and Gaps

The Hasina administration is monitoring risks but lacks concrete contingency plans. While the Prime Minister directed ministries to “prepare for prolonged impact,” specifics remain vague. Key oversights include:

• No subsidies announced for RMG exporters facing energy inflation.
• No strategic oil reserves to buffer price shocks.
• Minimal diplomatic outreach to secure alternative shipping routes.

The Worst-Case Scenario: U.S. Involvement and WW3

If Trump greenlights U.S. strikes—a decision expected by July 3—the calculus shifts dramatically:

• Global oil prices could exceed $150/barrel, triggering hyperinflation in import-dependent Bangladesh.
• Supply chain chaos might close the Suez Canal, diverting shipments around Africa and doubling delivery times.
• Remittance collapse becomes likely if Gulf states like Saudi Arabia or Qatar enter the conflict.

Navigating the Crisis: What Bangladesh Can Do

1. Diversify energy imports: Accelerate deals with Indonesia or Malaysia to reduce Gulf dependence.
2. Export emergency fund: Offer low-interest loans to garment factories for energy-efficient retrofits.
3. Diplomatic shielding: Leverage relations with Iran and the U.S. to protect migrant workers and trade corridors.

Conclusion: Geography Isn’t Immunity

Bangladesh’s economy sits in the crosshairs of a war it didn’t start. With U.S. intervention looming, the difference between manageable strain and catastrophic disruption hinges on preparation. As inflation erodes wages and factory orders dwindle, the government must move beyond warnings to actionable safeguards. The Iran-Israel war isn’t just a Middle Eastern crisis—it’s a test of Bangladesh’s resilience in an interconnected world. Failure to adapt could undo decades of growth overnight.