Bangladesh’s energy shock: How a distant war exposed deep structural risks

The Strait of Hormuz did not create Bangladesh's dependence on Gulf energy. It simply closed – and the country had nothing to fall back on.

Stand at a petrol station in Dhaka this Ramadan and the consequences of decades of deferred decisions become visible. Long queues. Rationed fuel. Fertiliser factories shut. Universities advancing holidays to conserve electricity. Workers stranded at airports, calling home without knowing when they will return.

On 28 February 2026, the United States and Israel struck Iran. Within days, the Strait of Hormuz was closed, Qatar halted LNG production, and all three of Bangladesh's long-term LNG suppliers declared force majeure simultaneously.

An emergency tender for replacement gas drew no bids. Not a single trader quoted a price. A second tender eventually attracted offers – at nearly triple the price Bangladesh had paid just weeks earlier. The finance minister reportedly called Washington to seek approval to purchase Russian oil.

These are the actions of a country caught unprepared. But Bangladesh's vulnerability is not accidental. It was documented in planning reports, highlighted by energy economists and flagged repeatedly in policy discussions that went unacted upon.

The Strait of Hormuz did not suddenly become important in 2026. Bangladesh simply never prepared for its closure.

An economy built on imported energy

Bangladesh's economy runs largely on energy it does not produce. Oil accounts for 26 percent of total energy supply, yet domestic production meets only 15 percent of demand. Qatar and the UAE together supply 72 percent of the country's LNG.

Of the 22 LNG cargoes scheduled between March and May 2026, 18 were set to pass through the Strait of Hormuz. When it closed, those supplies stopped.

Domestic demand for oil has grown by more than 300 percent since 2000. Bangladesh now ranks second in the Asia-Pacific region for electricity generation from oil, behind only Japan. The difference is that Japan maintains strategic petroleum reserves covering more than 200 days of consumption. Bangladesh has none.

The power sector requires roughly 2,500 million cubic feet of gas per day but is currently receiving only 850–900. More than 1,500 textile mills depend on gas for heat and captive power, while Boro rice cultivation relies on diesel-powered irrigation.

These are not isolated problems. They are part of a single, interconnected system. When global LNG prices surged by 130–183 percent within weeks, there was no buffer between the shock and the household.

Around 85 countries have already raised fuel prices in response to the crisis. Bangladesh has not, shielding consumers during Ramadan at a significant fiscal cost. That decision deserves recognition. But the longer it continues, the greater the financial strain becomes.

The people behind the numbers

The crisis is not abstract.

Four Bangladeshis have been killed since the strikes began – one each in Bahrain and Dubai, and two in Saudi Arabia. The body of Ahmed Ali from Barlekha in Moulvibazar arrived at Hazrat Shahjalal International Airport on 9 March after he was killed in Dubai. At least 14 others have been injured.

Over five days, 222 flights were cancelled, leaving tens of thousands of workers stranded mid-journey.

There are currently around 4.5 million Bangladeshi workers in the Gulf. In FY2024–25, six Gulf countries accounted for $16.79 billion in remittances – 55.4 percent of the national total.

History offers a sobering precedent. The Gulf War of 1990–91 displaced nearly 100,000 Bangladeshi workers. The Covid-19 pandemic triggered a sharp contraction before a gradual recovery.

Each time, the pattern was similar: shock, fragility, slow return. This time, however, the simultaneous pressure on energy makes the macroeconomic risk far more severe.

Managing the crisis is not enough

The government has taken several steps under pressure. It secured assurances from Iran that Bangladeshi vessels would not face obstruction. It engaged China and India on alternative supply options. It procured spot LNG at high prices to maintain electricity generation.

These actions reflect a state operating under strain.

But they are also reactive.

There are no strategic reserves to cushion shocks. Domestic gas exploration has not progressed at the required pace. Renewable energy accounts for less than 4 percent of the energy mix. A comprehensive protection framework for migrant workers – including job-loss insurance and evacuation planning – remains largely absent.

Bangladesh's diplomatic response has been cautious. The foreign ministry condemned violations of sovereignty and called for restraint without naming the countries involved.

This caution is understandable, given the country's economic ties with Western markets, its dependence on Gulf remittances and recent trade agreements.

Yet Bangladesh has historically demonstrated a more assertive diplomatic role. During the Iran–Iraq war, it participated in peace efforts under the Organisation of Islamic Cooperation and engaged both sides diplomatically. In 1978, it secured a seat on the UN Security Council.

These were not anomalies but outcomes of a foreign policy that recognised the value of active engagement.

Today, Bangladesh maintains working relationships with Washington, Riyadh and Tehran. Few countries occupy such a position. Rather than treating this as a constraint, Dhaka could leverage it as a platform for more proactive diplomacy.

The precedent exists. What remains uncertain is the willingness to act.

The plan exists, the urgency does not

The structural solutions are well known.

Bangladesh needs to build strategic petroleum reserves covering at least 30 days. It must accelerate offshore gas exploration in the Bay of Bengal, diversify LNG supply routes, complete the Matarbari deep-sea port and scale renewable energy to at least 20 percent of the energy mix.

Electricity imports from Nepal's hydropower system – insulated from Gulf geopolitics – should be expanded. A comprehensive protection framework for migrant workers must be established before the next crisis, not during it.

None of these proposals are new. All have appeared in policy documents.

What has been missing is urgency.

Structural reform requires sustained political attention. Yet that attention often fades once immediate crises ease and petrol queues shorten.

The workers waiting at Hazrat Shahjalal Airport for flights that keep getting cancelled are not abstract statistics. Nor are families waiting for remittances that have not arrived.

They are bearing the cost of decisions delayed for years.

Bangladesh has overcome far greater challenges in its history – from famine to war. There is no reason it cannot do so again.

But this crisis is different in one critical respect. It is not just about recovery.

It is about whether the country is willing to confront long-standing structural weaknesses – in energy, remittances and diplomacy – that can no longer be postponed.

Mahbuba Islam is a research assistant at the Dacca Institute of Research and Analytics (daira).

Muhammad Golam Moula is a research assistant at the Dacca Institute of Research and Analytics (daira).

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.