The Impact on Bangladesh of the US-Israeli Aggression against Iran

Professor M A Rashid, PhD :

The United States and Israel have jointly carried out airstrikes on Iran, resulting in explosions and destruction in several Iranian cities. Many people, including civilians, have been killed and injured. What was previously limited to regional diplomatic tension has now escalated into an active war situation, posing a serious threat to global security and stability.
In response to US-Israeli attacks, Iran has launched large-scale retaliatory missile and drone strikes. According to Iran’s Revolutionary Guard, not only Israel but also several U.S. military bases in the Middle East have been targeted. Iran has claimed missile attacks on more than 27 U.S. bases—an action that is historically rare. Israel has also been targeted, with Iran launching missiles and drones at key Israeli military installations, intensifying the conflict.
This means the conflict is no longer confined to limited retaliation or border tensions—it is expanding regionally across multiple locations simultaneously. The current situation indicates movement toward an active and widespread regional war involving multiple countries, geopolitical zones, and military bases.
Humanitarian Crisis
Panic has spread across Iranian cities, with people relocating to safer areas. The risk of bombings, missile, and drone attacks on civilians is increasing. Civilian casualties are expected to rise. There may be shortages of trauma care, blood, and essential medicines. Long-term mental health problems—especially among children and the elderly—could increase.
People from border areas may seek refuge in neighboring countries, creating regional humanitarian pressure. International organizations such as the United Nations and the International Committee of the Red Cross may need to provide assistance.
Global Economic Impact
The oil market is already being affected, and prices may rise further if the conflict continues or if the security of the Strait of Hormuz is disrupted. Energy markets, stock markets, and global supply chains are facing growing instability.
Many countries are urging a return to diplomatic solutions, as a prolonged conflict would impact not only the Middle East but also Asia, Europe, and Africa economically and politically.
Energy Security Crisis for Bangladesh
Bangladesh depends heavily on Middle Eastern energy imports. Instability in the Persian Gulf and the Strait of Hormuz could disrupt oil and LNG supplies. A rapid rise in oil prices would increase electricity generation costs and raise subsidy burdens, potentially widening the budget deficit.
Load shedding may increase, industrial production could suffer, transport costs may rise, shipping could be disrupted, insurance costs could increase, and supply delays could create immediate shortages.
If global oil prices increase:
Electricity generation costs will rise.Furnace oil and diesel-based power plants will become more expensive.LNG spot market prices may increase.The government may either raise electricity prices or increase subsidies.
Higher subsidies would: Increase fiscal deficits, reduce development spending, increaseborrowing, Create broader economic pressure
Broader Economic Impact
Prices of oil, fertilizer, and food grains will increase. Inflation may intensify. Foreign exchange reserves will come under pressure due to higher import bills. A decline in reserves could lead to currency depreciation.
Export Sector Risks
Bangladesh’s export sector heavily depends on the ready-made garment (RMG) industry, whose main markets are the European Union and the United States. Any economic downturn in these regions would directly impact Bangladesh.
If consumer demand declines in Europe and the U.S.:Garment orders will decrease.Production will decline. Investment may slow. Employment risks will increase, especially for low-income and female workers.
Reduced exports would lower foreign currency earnings, affecting reserves, import capacity, and economic stability. Long-term impacts could include slower growth, reduced revenue collection, and constraints on social protection spending.
To mitigate these risks, Bangladesh must: Diversify export markets (Asia, Latin America, Africa), Increase product diversification (higher-value and technical garments), Strengthen local raw material production, actively participate in regional trade agreements, Strengthen alternative foreign currency sources (remittances, IT exports)
Migrant Workers and Remittances
Hundreds of thousands of Bangladeshi workers are employed in Saudi Arabia, the United Arab Emirates, Qatar, and other Gulf countries. If the war spreads:Worker safety could be at risk.Job losses or relocations may occur.Remittance inflows may temporarily decline. This would significantly impact Bangladesh’s foreign currency earnings.
Diplomatic Balance
Bangladesh traditionally follows a balanced and pragmatic foreign policy based on the principle: “Friendship with all, malice toward none.” It maintains economic and strategic ties with the United States and Western countries, while also sustaining religious, cultural, and labor-market-based relationships with the Middle East and the broader Muslim world.
If a major regional or global war intensifies—particularly in the Middle East—Bangladesh may face difficult diplomatic positioning challenges. Balancing Western expectations and dependence on remittances from the Muslim world would become complex.
Worst-Case Scenario: Potential Impact on Bangladesh
If the conflict involving the United States, Israel, and Iran escalates into a prolonged regional war, Bangladesh could face the following severe economic and social consequences:
Oil Prices Reaching $150–200 per Barrel-A dramatic surge in global oil prices would sharply increase Bangladesh’s fuel import bill.Electricity generation costs would rise significantly, especially for furnace oil and diesel-based plants. The government would face a difficult choice between raising fuel and electricity prices or expanding subsidies.Higher energy costs would increase transport, fertilizer, and food production expenses, accelerating inflation.
20–30% Decline in Remittances-If instability spreads across Gulf countries; many Bangladeshi migrant workers could face job disruptions.A significant drop in remittance inflows would reduce foreign currency earnings.Lower remittances would weaken domestic consumption and reduce rural household income stability.
Significant Currency Depreciation-Higher import costs combined with lower remittance and export earnings would strain foreign exchange reserves. A decline in reserves could lead to sharp depreciation of the Bangladeshi Taka.Currency depreciation would further raise import costs, creating a vicious cycle of inflation.
Industrial Slowdown- Rising energy and raw material costs would reduce industrial profitability.Export-oriented sectors, particularly ready-made garments, could experience declining orders if global demand weakens. Investment may slow, production may decline, and unemployment risks could increase.
Strategic Response Framework
Energy Reorientation-Secure LNG and oil imports beyond the Middle East (Malaysia, Indonesia, Africa),Shift from spot purchases to long-term contracts, build 3–6 months of strategic oil reserves, Expand renewable energy (solar and wind).Improve industrial energy efficiency,
Economic Stability- Reform foreign exchange management, temporarily restrict non-essential imports,increase export incentives, protect reserves through diaspora bonds and investment schemes, consider bilateral currency swaps (e.g., with China or India), Target subsidies effectively,Monitor supply chains
Migrant Protection-Establish emergency support cells through embassies in Gulf countries, incentivize remittance through formal channels, Expand digital transaction facilities
Food Security- Increase stockpiles of rice, wheat, edible oil, vegetables, and pulses, maintain 3–6 months of domestic reserves,diversify import sources (India, Vietnam, Thailand, Canada), Strengthen agreements with Malaysia, Indonesia, Argentina for edible oil, increase agricultural productivity, Maintain fertilizer subsidies.
Industrial Security-Strengthen local production and supply chains, reduce excessive import dependence, set minimum production targets for essential goods, Ensure energy and transport infrastructure reliability
The direct military attack on Iran by the United States and Israel has made the global situation extremely unstable. The impact will not remain confined to the Middle East; it will significantly affect the global economy, energy markets, security, and diplomacy.
For Bangladesh, managing energy dependence, diversifying foreign markets, strengthening reserves, ensuring migrant safety, maintaining diplomatic balance, and securing food and industrial stability will be crucial.
If the war lasts 3–6 months, economic pressure may remain manageable.
If it extends beyond one-year, structural economic reconfiguration will become necessary.
A direct military attack on Iran by the United States and Israel has made the global situation extremely unstable. Its impact will not be confined to the Middle East alone but will have far-reaching effects on the global economy, energy markets, security, and diplomacy.

(The author is a Senior Fellow, South Asia Institute of Policy and Governance (SIPG), North South University)