Riazul Haque
The Strait of Hormuz, a narrow waterway between the Persian Gulf and the Gulf of Oman, is one of the most geopolitically sensitive regions in the world. Nearly one-quarter of the world’s traded oil passes through this strategic passage around 20 to 22 million barrels per day. Even a one-day disruption in this route can have ripple effects across the global energy market, affecting both oil-exporting and oil-importing nations. As an energy-import-dependent developing country, Bangladesh would not be immune to such a shock.
Located between Iran to the north and Oman to the south, the Strait of Hormuz is just 39 kilometers wide at its narrowest point. It serves as the primary export route for crude oil and liquefied natural gas (LNG) from countries like Saudi Arabia, Kuwait, Bahrain, Qatar, Iraq, and Iran. Due to the overwhelming influence of Middle Eastern energy on global markets, any disruption in this route can cause oil prices to skyrocket.
A large portion of Bangladesh’s energy demand is met through imported fuel, primarily from countries like Saudi Arabia, Kuwait, and the United Arab Emirates. Most of these shipments pass through the Strait of Hormuz. In recent years, Bangladesh has also started importing LNG. Therefore, any interruption in maritime traffic through this strait would have both direct and indirect consequences for our economy.
If the Strait of Hormuz is closed or supply is disrupted, it would immediately impact fuel prices in Bangladesh. A sudden rise in global oil prices would increase the country's import bill. The government might initially try to stabilize domestic fuel prices by increasing subsidies, but this would place additional pressure on the national budget in the long run. Increased transport costs would raise prices of essential goods, disrupt industrial production, reduce electricity generation, and potentially lower agricultural yields due to irrigation constraints.
The ready-made garment (RMG) sector, the backbone of Bangladesh’s economy, could also be adversely affected. Many raw materials used in garment production, such as synthetic fibers and chemicals derived from petroleum, are imported via this route. Energy shortages could disrupt production, leading to cancelled export orders and a decline in foreign exchange earnings, with negative consequences for the broader economy.
About 80% of Bangladeshi migrant workers are employed in Middle Eastern countries. These economies are largely driven by energy exports. A disruption in oil exports due to a closure of the Strait of Hormuz could trigger an economic slowdown in those nations, resulting in layoffs, hiring freezes, or wage cuts for expatriate workers. This would be a significant blow for Bangladesh, as remittances are a key contributor to the country’s foreign exchange reserves.
The government would be forced to seek alternative energy sources, which would likely be more expensive. Moreover, the existing dollar crisis could worsen. As import costs rise, managing inflation would become increasingly difficult. The poorest and lower-middle-income groups would bear the brunt of the hardship.
The geopolitical uncertainty surrounding the Strait of Hormuz serves as a stark warning for import-dependent nations like Bangladesh. To address future energy crises or disruptions in global supply chains, Bangladesh must adopt forward-looking and practical strategies. These should not only aim to manage short-term shocks but also ensure long-term energy and economic security.
First, Bangladesh must invest in alternative energy sources. There is significant potential for renewable energy particularly solar and wind power. Expanding decentralized electricity generation at both institutional and household levels could reduce import dependence to some extent.
Second, the country needs to enhance its national fuel storage capacity. At present, reserves are only sufficient to meet short-term demand. Strategic plans should be developed to build reserves capable of covering at least one to two months of national demand.
Third, relying on a single source or region for fuel imports is risky. Bangladesh should diversify its energy import contracts. In addition to the Middle East, strategic agreements should be pursued with countries like Malaysia, Indonesia, Russia, and African nations to ensure uninterrupted supply even during regional disruptions.
Fourth, the country’s port and maritime infrastructure must be strengthened. If supply routes are disrupted, the ability to quickly respond with alternative shipping channels will be crucial. Enhancing the capacity of ports like Payra, Chattogram and Mongla, as well as improving navigational security for alternative routes, is essential.
The importance of the Strait of Hormuz is so immense that it is often called the ‘lifeline of energy’ for the global economy. Even a temporary closure could send shockwaves through the world’s largest economies. Bangladesh, as a developing country, is not beyond its reach. Therefore, strategic thinking, practical preparedness, and diversified planning are urgently needed to ensure the country’s energy and economic security. Because the flames of global geopolitics may be burning elsewhere but the smoke can easily drift into our own home.
(The author is an Economic Analyst and Joint Director, Bangladesh Bank).
