Bangladesh’s trade and energy lifeline under fresh threat as Red Sea tensions rise
Further escalation in the Red Sea would require Europe-bound vessels from Bangladesh to take alternative routes around Africa’s Cape of Good Hope, a detour of approximately 7,500 kilometres
Highlights:
- Houthi control could disrupt Bangladesh's vital Red Sea shipping routes
- Cape detours could add 7,500 kilometres to Europe-bound journeys
- Transit times may increase 15-30 days amid disruptions
- Freight rates could rise 40%-50%, hurting smaller exporters most
- Simultaneous Hormuz and Red Sea disruptions threaten Bangladesh's fuel supplies
- Rising global oil prices could sharply increase Bangladesh's import costs
Bangladesh's import-export trade and fuel supply could come under fresh pressure if growing Houthi control over Yemen's Red Sea coast disrupts shipping through the Bab el-Mandeb Strait, an alternative route that has gained importance amid the disruption in the Strait of Hormuz.
Further escalation in the Red Sea would require Europe-bound vessels from Bangladesh to take alternative routes around Africa's Cape of Good Hope, a detour of approximately 7,500 kilometres.
This journey between Asia and Europe is extending transit lead times by 15 to 30 days and pushing shipping freight rates up by 40% to 50% due to rising insurance and fuel expenses, industry insiders said.
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Businesses recall similar experiences in recent years as Houthis had disrupted shipping through the vital sea route in 2023 in support for Palestinians during Israel's war in Gaza. They resumed the attacks in the Red Sea this year initially targeting Saudi Arabian interests in response to the US war on Iran.
The latest development has also heightened concerns over Bangladesh's energy supply, as disruptions to both the Strait of Hormuz and Bab el-Mandeb could further strain global oil and gas supply lines.
International media reports yesterday said Houthi forces had taken full control of Yemen's Red Sea coastline after rapidly advancing against government forces. Saudi Arabia has also suspended operations on its East-West oil pipeline as a precaution following drone attacks launched from Iraq, according to Al Jazeera.
The developments could have significant implications for Bangladesh because the Red Sea and Suez Canal route is a major maritime corridor for the country's trade with Europe and the Middle East.
According to Kpler, rerouting cargoes from Yanbu to South Korea via that route would increase the journey from about 24 days to roughly 54 days.
Longer routes, higher freight costs
Fazlul Hoque, a leading ready-made garment exporter and administrator of the Federation of Bangladesh Chambers of Commerce and Industry, said the Red Sea is the vital sea route for Bangladesh's trade with Europe.
"If it is disrupted, ships will have to take a detour around the Cape of Good Hope. This will take longer and increase freight costs," he told The Business Standard.
He said Bangladesh's exports to Middle Eastern countries, worth more than $800 million, could also suffer a major setback if shipping through the Red Sea is disrupted along with continued restrictions in Hormuz.
Kabir Ahmed Khan, former president of the Bangladesh Freight Forwarders Association, said the latest development has created serious concern among freight forwarders.
"If this route is closed, it could take around 15 additional days for Bangladesh's consignments to reach Europe," he said.
"With fuel charges, shipping insurance and other costs added, freight rates could rise by 40% to 50%," Kabir said.
Khairul Alam Suzan, former vice-president of BAFFA, said the latest development would have a negative impact on Bangladesh's trade with Europe and the Middle East.
"We are very concerned about the current developments in the Red Sea. So far, we have not received any notice from mainline operators regarding changes in freight rates or vessel schedules. We may receive updates by Monday, which will give us a clearer picture of what changes are coming," he said.
Following a series of Houthi attacks on foreign vessels in 2022-23, mainline operators (MLOs) became more cautious, with most container ships since being rerouted around the Cape of Good Hope.
According to Sogese's September Europe Container Market Update, Cape of Good Hope diversions account for around 5% to 7% of global container capacity, equivalent to roughly 1.7 million to 2.4 million TEUs.
A senior official of a leading MLO, speaking to TBS on condition of anonymity, said, "We have been avoiding the Red Sea and using alternative routes for the past three years."
However, he said a fresh rise in fuel prices following the latest development could push up freight rates.
Small exporters face greater pressure
The impact of higher freight costs could be particularly severe for small and medium-sized exporters, industry insiders said.
In FOB-based exports, the buyer generally bears the main international freight cost after the goods are handed over according to the agreed terms. However, exporters could still come under indirect pressure if buyers seek to share the additional logistics costs with suppliers.
Inam-ul Hoque Khan Bablu, senior vice-president of the Bangladesh Garment Manufacturers and Exporters Association, said smaller exporters could be particularly vulnerable.
"If freight costs rise, buyers may try to pass part of the additional cost on to suppliers, particularly smaller and medium-sized exporters. To retain their orders, they may be forced to absorb part of the additional cost," he said.
The pressure would be greater for exporters operating under landed duty paid arrangements, under which the seller is responsible for delivering goods to the buyer's warehouse.
Bablu said around 5% to 10% of Bangladesh's shipments are exported under LDP arrangements, meaning exporters under such contracts would have to absorb the full increase in shipping costs.
Energy supply risks deepen
The disruption also raises concerns over Bangladesh's fuel supply and import costs as global energy markets face pressure from the simultaneous disruption of major maritime routes.
Brent crude settled at $104.61 per barrel on Friday, while the price had been $87.07 a month earlier. Murban crude, a key crude grade imported by Bangladesh, rose to $119.46 per barrel from $82.25 over the same period, according to the figures provided.
The Asian LNG benchmark Japan-Korea Marker (JKM) also rose to $24.82 per MMBtu.
M Tamim, former special assistant to the chief adviser of the caretaker government, said Bangladesh should closely monitor developments and move quickly to strengthen fuel inventories, particularly diesel stocks.
"A very bad situation is befalling us following the new development over Bab el-Mandeb," he said.
"Under the current situation, we need to rush to increase inventory for refined products, especially diesel. The US is already experiencing diesel shortages, which gives a very bad message about fuel shortages across the world," Tamim added.
He said simultaneous disruption to major oil routes could further tighten global fuel supplies.
"After the stopping of oil flowing through the Saudi pipeline and closure of Bab el-Mandeb, the world would experience significant shortages of fuel. What we can do at best is monitor the development and take prompt action to increase inventory," Tamim said.
The Strait of Hormuz carries around 20% of global crude oil and 15% of LNG from the Middle East to markets in Europe, Asia and North America. Around 89% of the energy passing through Hormuz is destined for Asian markets.
Until now, the Red Sea route through Bab el-Mandeb had provided an alternative for some shipments affected by the Hormuz disruption.
The disruption is already visible in shipping data. According to the IMF's PortWatch platform, Saudi cargo shipments fell from 47.5 million tonnes a year earlier to 6.3 million tonnes during April and May, while exports through the Red Sea rose from 29.6 million tonnes to 54.8 million tonnes, replacing roughly 61% of the volume lost due to the Hormuz closure.
US Energy Information Administration data show oil flows through Hormuz fell from 21.6 million barrels per day in the fourth quarter of 2025 to 4.9 million barrels per day in the second quarter of 2026.
