Major oil-producing states generate significant quantities of oil, but prices can spike dramatically during geopolitical tensions. Such conflicts can disrupt oil supply, causing prices to rise sharply. This increase in oil prices elevates production costs and drives inflation in economies around the world, including Bangladesh.
The Israel-Hamas conflict brings a myriad of global and economic issues. Key problems include decreased trade within the region, tighter banking conditions, and higher energy prices. The recent Israeli military attacks in Gaza have exacerbated these issues, creating a new crisis in the Middle East with worldwide ramifications.
The supply of oil is highly sensitive to geopolitical tensions. Conflict-related disruptions can lead to significant increases in oil prices. The BBC reports that while the Israeli-Hamas conflict has not drastically impacted the world commodity market, oil prices have risen by 6%. The prices of most industrial metals and agricultural commodities have remained unchanged, but the focus remains on crude oil prices due to their broad economic implications.
The United States is advocating for a political settlement, focusing on Middle Eastern stability and combining funds for both Israel and Ukraine. This dual focus aims to mitigate potential economic impacts by examining the course of the Middle East conflict and learning from previous wars.
Economists are closely monitoring the Middle East crisis, drawing parallels with past conflicts to predict potential economic consequences. The World Bank’s latest Commodity Markets Outlook report warns of a severe energy shock if the conflict worsens. The protracted Israel-Palestine conflict has driven up oil prices above the Brent benchmark, with the average price per barrel expected to reach $90 globally. Escalating tensions in Gaza and potential fallout in the Middle East could increase oil prices by up to 75%. Supply cuts from major producers like Saudi Arabia could lead to a 6–8 million barrel per day decline in global oil supply.
Bangladesh, one of the few nations recognizing Palestine as a state, has historically supported Palestine in the conflict. Until two years ago, it imposed travel restrictions on its citizens visiting Israel. The Bangladeshi foreign minister has condemned the recent indiscriminate bombardment of the Gaza Strip and the killing of civilians, especially women and children. According to Al Jazeera, October 2025, the Gaza Health Ministry cited by Al Jazeera’s live tracker, the confirmed Palestinian death toll has risen to at least 68,527 people, including over 20,179 children, with total injuries exceeding 170,395.
Rising global oil prices increase Bangladesh’s import costs, affecting inflation and production expenses. Bangladesh relies heavily on imported oil for its energy needs. A spike in oil prices can lead to higher transportation and manufacturing costs, which in turn can increase the prices of goods and services across the economy. This inflationary pressure can erode consumer purchasing power and slow economic growth.
Regional trade decreases can affect global supply chains, impacting Bangladesh’s exports and imports. The Middle East is a significant trading partner for many countries, including Bangladesh. Disruptions in trade routes or increased costs due to higher shipping rates can lead to delays and increased expenses for businesses. This can affect the competitiveness of Bangladeshi exports in international markets and increase the cost of imported goods.
Global financial instability can lead to tighter banking conditions, influencing Bangladesh’s economic growth. Financial markets are interconnected, and instability in one region can quickly spread to others. Tighter banking conditions can lead to reduced access to credit for businesses and consumers, which can stifle investment and spending. This, in turn, can slow economic growth and potentially lead to higher unemployment rates.
The Israel-Palestine conflict underscores the interconnectedness of global economies. The potential for an energy shock is particularly concerning. The World Bank’s warning of a possible 75% increase in oil prices highlights the severity of the situation. Such an increase would not only affect transportation and production costs but also have broader implications for economic stability and growth.
Looking at historical precedents, previous conflicts in the Middle East have led to significant disruptions in oil supply and spikes in oil prices. For instance, the oil embargo of 1973 caused oil prices to quadruple, leading to widespread economic turmoil. More recently, conflicts such as the Gulf War and the Iraq War have also led to spikes in oil prices and economic instability.
In this regard, policymakers in Bangladesh must closely monitor developments in the Middle
East and consider the potential economic implications of the conflict as part of their broader
macroeconomic management strategies.
Firstly, a protracted or intensified conflict tends to raise concerns about the state of the world
economy and affect commodity prices, particularly those of oil, which Bangladesh buys in large
quantities. Secondly, a sizable number of remittances from its nationals who are employed in Middle Eastern nations are received by the nation. Conflicts like these could foster instability in the area, which could impact Bangladeshi workers overseas' employment status and remittance flows.
Furthermore, increased geopolitical tensions may cause international investors to be less inclined
to make investments in nations that they consider to be politically unstable, which could have an
impact on Bangladesh’s investment environment. In addition, the war may put diplomatic strain on Bangladesh’s relations with some countries, which could affect aid or commercial deals.
Finally, if the conflict results in a humanitarian crisis, Bangladesh might be compelled to divert
resources towards providing aid and assistance, potentially affecting its budget allocations for
other development projects. Thus, while the direct impact may be indirect, the Israel-Palestine
conflict can significantly influence Bangladesh’s economy through various channels.
There are a few tactical options available to manage the possible effects of the Israel-Palestine conflict on Bangladesh’s economy. First, Bangladesh should work harder to diversify its trading relationships in order to lessen its reliance on areas that are liable to geopolitical unrest.
Simultaneously, putting emphasis on domestic businesses such as manufacturing, technology, and agriculture can increase resilience and self-sufficiency against outside economic shocks.
Additionally, the nation might put measures in place to assist foreign employees, guaranteeing that remittance flows continue to be strong even in the face of uncertainty worldwide.
In addition to making investments in infrastructure and disaster preparation to lessen the effects of external shocks, diplomatic engagement is crucial in promoting peaceful resolutions and regional stability. Moreover, investigating alternative energy sources and promoting regional collaboration can strengthen economic resilience and lessen weakness to changes in international markets.
Global market instability is made worse by the conflict, especially in industries like oil, which is a vital import for Bangladesh. An increase in oil prices causes inflation, higher production costs, and a pressure on the balance of payments. Moreover, investor confidence may falter if geopolitical tensions increase, which would lead to a decrease in foreign direct investment—a crucial factor in Bangladesh’s economic expansion.
