The ongoing conflict in the Middle East has triggered a sharp rise in global oil prices, placing significant pressure on Bangladesh’s power and energy sector. International crude oil prices surged after tensions escalated between the United States, Israel, and Iran, raising fears of supply disruptions across global energy markets.
The price of Brent crude oil has climbed to around $108.77 per barrel (as of the time writing this report), marking the largest single-day increase since the COVID-19 pandemic in 2020. Oil prices rose nearly 28 percent within a week, and analysts warn that prices could climb as high as $150 per barrel if the conflict continues.
The surge follows joint airstrikes by the United States and Israel on several targets in Iran, including oil depots. Iran has retaliated, increasing fears of wider conflict in the region. The tension has severely disrupted shipping through the Strait of Hormuz, a key global energy route through which about one-fifth of the world’s oil supply passes each day. As shipping slowed dramatically, global oil markets experienced sudden volatility.
Market analysts say the destruction of Iranian energy facilities could lead to major supply disruptions from the Middle East, threatening higher energy costs for countries around the world.
Impact on Bangladesh
The sharp rise in global fuel prices is already affecting oil-import-dependent economies like Bangladesh. Increased fuel import costs are pushing up electricity production expenses and expanding the government’s subsidy burden.
Officials from the Power Division said the Bangladesh Power Development Board (BPDB) currently owes around Tk460 billion to domestic and foreign companies, highlighting growing financial strain in the sector. At the same time, the government faces pressure from the International Monetary Fund (IMF) to reduce subsidies as part of its loan program, complicating policy decisions in the energy sector.
Bangladesh relies heavily on imported energy
Nearly 100 percent of the country’s crude oil is imported, mainly from Saudi Arabia and the United Arab Emirates. Refined petroleum products are imported from China, Singapore, Malaysia, and Indonesia.
Domestic production is limited. Government-owned Eastern Refinery Limited (ERL) and several private refineries produce about 40 types of petroleum products, including petrol and octane, from condensate. However, their combined capacity of 1.6 million tons per year only partially meets domestic demand.
Energy experts say strengthening domestic refining capacity and providing policy support to local refineries could help Bangladesh better manage future energy shocks.
Oil Prices Cross $100 Mark
Global oil prices have now crossed $100 per barrel for the first time since 2022. In Asian markets on Monday:
Brent crude rose 15.5 percent to $107.16 per barrel
NYMEX Light Sweet crude increased more than 17 percent to $106.77 per barrel
Prices surged rapidly, jumping 10 percent within a single minute and rising another 10 percent within the next 15 minutes. On March 9, Brent crude traded around $108–$109 per barrel, while WTI crude climbed close to $108, reflecting increases of nearly 18–19 percent.
Growing Concerns for the Economy
Analysts warn that if the Strait of Hormuz remains closed until the end of March, oil prices could surpass $150 per barrel, approaching historic highs. Such a situation could trigger a global energy shock similar to that seen in the 1970s, causing inflation, higher transportation costs, and reduced industrial output worldwide.
For Bangladesh, which imports 6–7 million tons of fuel annually, the impact could be severe. A $10 increase per barrel significantly raises the national import bill, while prices reaching $150 could add several billion dollars to the country’s fuel import costs and increase pressure on foreign exchange reserves.
The Bangladesh Petroleum Corporation (BPC) could face substantial losses unless domestic fuel prices are adjusted.
Pressure on the Power Sector
The country’s electricity sector may also face rising costs, as many power plants depend on furnace oil. Higher fuel costs would either require the government to increase subsidies or raise electricity tariffs.
Other countries have already begun adjusting prices in response to rising oil costs. Vietnam has increased diesel and petrol prices by 21 percent, while Pakistan raised petrol prices by 20 percent, reaching 320 rupees per liter. Petrol prices in the United States have also risen by about 10 percent in a week, while inflation concerns are growing in Europe.
Government Response
Bangladesh authorities say fuel supplies remain stable despite global uncertainty. The government has introduced fuel rationing measures to manage demand during the crisis.
Energy Minister Iqbal Hasan Mahmud Tuku said rationing would remain in place until the conflict subsides, although the government currently has no immediate plans to increase fuel or electricity prices.
BPC Chairman Engineer Rezanur Rahman said Bangladesh’s fuel import contracts are typically arranged for six-month periods, with supplies secured until June. Imports from China, Malaysia, Singapore, and Indonesia are transported through routes not directly affected by the Iran conflict, and fuel reserves in the country remain sufficient.
Subsidy Challenges and Future Risks
Despite these assurances, financial pressure in the power sector continues to grow. In fiscal year 2024–25, subsidies for the power sector reached 620 billion taka, although the revised 2025–26 budget reduced the allocation to 360 billion taka.
BPDB’s financial figures illustrate the strain. In FY 2024–25:
Revenue: 709.26 billion taka
Expenditure: 1.265 trillion taka
Deficit: 556.58 billion taka
Even after receiving 386.36 billion taka in subsidies, the net deficit remains 170.21 billion taka.
Under its IMF loan agreement, Bangladesh must gradually reduce energy subsidies and introduce market-based fuel pricing. However, policymakers face a difficult challenge, as higher fuel prices would increase transportation, agricultural, and industrial costs, directly affecting the cost of living.
Experts Warn of Larger Crisis
Energy analysts warn that if the conflict continues, Bangladesh could face rising inflation, higher import costs, and mounting subsidy pressures.
Energy expert Professor M. Tamim said prolonged conflict could significantly reduce LNG supply, potentially cutting around 900 million cubic feet per day, which would affect both industries and power plants.
Another expert, Dr. Ejaz Hossain, warned that if the conflict does not subside within two weeks, disruptions in global energy supply could intensify, leading to even higher costs and serious energy shortages.
Experts suggest that Bangladesh must expand fuel reserves and invest more in renewable energy to reduce dependence on imported fuels, though such measures will take time to deliver results.
Bd-pratidin English/ ANI
