For Bangladeshis, the distant war in the Middle East is anything but remote.
Its effects are reaching their doorsteps through rising poverty, job losses, and higher energy prices, adding pressure to an economy already weakened by inflation, a stressed banking sector and shrinking fiscal space.
The risks are mounting, warns a mid-June World Bank assessment on the proposed Contingent Emergency Response Project, which would provide budget support to the government.
Bangladesh entered the crisis with little room to absorb another major external shock.
Poverty has been rising in recent years as limited job creation, weak growth in labour incomes and elevated inflation eroded the poverty-reducing impact of economic growth. The number of poor people increased by an estimated 14 lakh in 2025.
The outlook for 2026 is grimmer.
The number of people expected to move out of poverty was 17 lakh, which is now projected to be 5 lakh because of the Middle East conflict, while nearly 6 lakh jobs are expected to be lost, the World Bank said.
Rising prices are expected to account for around 10 percent of the increase in poverty this year.
Partial pass-through of higher energy prices to customers, some of which has already occurred, could push up inflation by more than 0.5 percentage points. Second-round effects on food and non-food prices would hit the poorest households hardest and widen the poverty gap, the report said.
Despite the crisis, inflation fell below 9 percent in July and it would have declined further had the Middle East conflict not erupted, Finance and Planning Minister Amir Khosru Mahmud Chowdhury told The Daily Star a week ago.
The energy sector is among the areas hardest hit by the conflict, with disruptions affecting power generation, domestic fertiliser production and industrial activity.
Bangladesh’s heavy dependence on imported energy, particularly LNG, leaves it highly vulnerable to geopolitical disruptions. Gas accounts for more than 50 percent of primary energy supply, while domestic production has fallen 15 percent from its 2016 peak. The country sources 60-65 percent of its crude oil and 55-60 percent of its LNG from the Middle East.
The conflict has already disrupted energy markets. Five of Petrobangla’s six LNG supply contracts have been declared force majeure, while spot LNG prices have risen to $24-28 per million British thermal units (MMBtu), more than double their previous level.
Last week, Bangladesh agreed to pay more than $24 per MMBtu for two LNG cargoes to be delivered in September, as it scrambles for supplies amid a global market squeeze triggered by the US-Israel war on Iran.
The government is now looking for ways to expand its capacity to receive and process LNG.
Speaking about the crisis, Khosru said, “This cannot be solved by tomorrow morning; what we inherited from before cannot be fixed overnight. It takes time.”
The disruption is also putting pressure on government finances.
Energy subsidy outlays are projected to rise to 2.8 percent of GDP in FY26, with the total subsidy burden reaching $2.5-4.8 billion, compared with about $1.5-2.5 billion in recent years. This could crowd out social and emergency spending, the World Bank said.
The energy crisis is closely linked to another major vulnerability: agriculture.
Disruptions to agricultural input supply chains leave smallholder farmers, who account for around 40 percent of the population, highly “exposed to food security and welfare shocks”, the report said.
Bangladesh’s agriculture is highly input-intensive. Fertiliser use has reached 391.9 kg per hectare, more than double the global average, making domestic food production acutely sensitive to global supply disruptions and price volatility, the World Bank warned.
The country relies heavily on imported fertilisers while domestic production depends on stable gas supplies.
The conflict has already disrupted the system, with five of Bangladesh’s six domestic urea plants forced to suspend production because of gas shortages, while urea prices have increased by 30 percent.
“Under a prolonged disruption scenario, prices could potentially double,” the World Bank warned.
The country experienced similar pressures after Russia’s invasion of Ukraine, when global fuel and fertiliser shocks rapidly pushed up food prices, increased the fiscal burden of fertiliser subsidies.
Similar economic effects are emerging under the current crisis, the report said.
The health sector is also under strain.
Global supply-chain disruptions, along with domestic power and fuel shortages, are increasing costs for around 19,000 public health facilities and 6,200 private hospitals and clinics, the World Bank said.
Public tertiary facilities, comprising around 64 hospitals across the country, alone face monthly electricity costs of about $0.6-1.1 million. Private healthcare providers are spending more to fuel power generators.
The conflict is also disrupting imports of pharmaceutical ingredients for Bangladesh’s 250 drug manufacturers. More than 90 percent of hospital consumables are imported, further exposing the sector to higher freight and fuel costs.
These pressures are weakening service delivery at a time when the country is already facing acute health needs, the World Bank said.
Since March, a measles outbreak has killed hundreds of children, with the response hampered by government fiscal and capacity constraints, it said.
CPD Distinguished Fellow Prof Mustafizur Rahman said the World Bank’s projections reflect disruptions already being felt in Bangladesh, including a lack of new industrial gas connections, shorter working hours, and factory closures due to the energy crisis.
He said recent factory closures and job losses had sparked public debate, underscoring the seriousness of the situation.
“This is the reality we must acknowledge. The World Bank’s report has revealed this reality even more starkly,” he said.
