Bangladesh’s strategic dilemma over Hormuz crisis

The escalating confrontation involving Iran, Israel and the United States has once again pushed the global energy system to the edge of uncertainty.

What initially appeared as a regional military confrontation is now reverberating across financial markets, shipping lanes and energy supply chains worldwide.

At the heart of this unfolding geopolitical drama lies a narrow maritime corridor whose strategic importance far exceeds its geography: the Strait of Hormuz.

This slender waterway connecting the Persian Gulf with the Arabian Sea is widely regarded as the most critical energy chokepoint on the planet.

On average, around 20 million barrels of crude oil pass through the strait each day – roughly one-fifth of global oil consumption.

The route also carries about 20-22 percent of the world’s liquefied natural gas (LNG) exports, much of it originating from Qatar and destined for Asian markets.

Such staggering volumes explain why any disruption in the Strait of Hormuz immediately sends shockwaves through the global economy.

For energy-importing countries across Asia, the passage is not simply a shipping lane – it is an economic lifeline.

The consequences for global markets are profound. When supply contracts so dramatically, prices react almost immediately.

Analysts warn that if the crisis deepens or maritime transit through Hormuz becomes impossible, crude prices could surge toward $150-$200 per barrel, levels not seen since the most extreme energy shocks in modern history.

Even before such a scenario fully materializes, the geopolitical risk premium is already pushing prices upward.

Brent crude has approached the $100 mark amid supply fears, while global refiners and shipping companies are recalibrating operations to cope with potential shortages.

Major Asian refiners have begun cutting processing volumes as uncertainty over Middle Eastern supply intensifies.

In China, for instance, one of the world’s largest refining companies has reduced crude runs by more than 10 percent due to disruptions tied to the Gulf crisis.

For Bangladesh, the geopolitical tremors of the Gulf conflict carry particularly serious implications.

Although geographically distant from the battlefield, the country’s economic stability remains deeply intertwined with Middle Eastern energy routes and markets.

First, Bangladesh is heavily dependent on imported energy, including oil and LNG sourced directly or indirectly from Gulf producers.

Any disruption in supply or surge in prices would quickly translate into higher fuel import bills, increased electricity generation costs and rising inflation.

Second, the Gulf region constitutes one of Bangladesh’s most important trade partners.

Bilateral commerce with countries such as Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and Bahrain has expanded steadily in recent years, encompassing both imports of energy and exports of manufactured goods.

A prolonged regional conflict could therefore disrupt shipping logistics, insurance costs and trade flows across the Arabian Sea.

If maritime routes become risky or freight costs escalate, Bangladeshi exporters-from ready-made garments to processed foods-may face delays, higher shipping charges and shrinking profit margins.

Third, and perhaps most crucially, Bangladesh’s economy relies heavily on remittances from migrant workers employed across the Gulf.

Millions of Bangladeshi workers reside in Saudi Arabia, the UAE, Qatar, Kuwait and Oman, collectively sending billions of dollars home each year.

Any economic slowdown in these host countries – caused by conflict, falling investment or declining oil revenues – could directly reduce remittance inflows, weakening Bangladesh’s foreign currency reserves and financial stability.

Beyond the immediate energy shock, the Hormuz crisis also highlights the fragility of modern supply chains.

The global economy operates through complex logistical networks where energy, shipping and finance intersect.

Insurance premiums for tankers and cargo vessels have already begun rising as maritime security risks increase.

Shipping companies may be forced to reroute vessels through longer routes around Africa or rely on alternative pipelines with limited capacity.

Yet these alternatives remain insufficient. Existing bypass pipelines from the Gulf can carry only about 3.5 million barrels of oil per day – far below the roughly 20 million barrels normally transported through Hormuz.

For Bangladesh, the unfolding crisis offers a stark reminder of the risks associated with heavy dependence on a single energy corridor.

While the country cannot influence Middle Eastern geopolitics, it can strengthen its economic resilience through strategic planning Energy diversification should become a central pillar of national policy.

Expanding LNG import sources beyond the Gulf, investing in renewable energy and strengthening regional energy cooperation could reduce exposure to geopolitical shocks.

Equally important is the need to broaden export markets and reduce excessive reliance on a limited number of trading partners.

Greater integration with Southeast Asian and African markets could provide alternative outlets if Gulf economies face instability.

Finally, macroeconomic resilience – through stronger foreign exchange reserves, prudent fiscal policy and stable financial institutions – remains essential in navigating global uncertainties.

For Bangladesh, the lesson is clear: in an increasingly volatile geopolitical environment, economic security is inseparable from energy security.

The events unfolding in the Gulf may appear distant, but their economic ripples could reach Dhaka’s ports, factories and households sooner than expected.

(The writer is a banker and
economic analyst).