As the US–Iran war disrupts energy flows, Bangladesh’s experience highlights that resilience depends not only on diversified imports but also on stable regional partnerships
Image Source: Getty Images
Among the many consequences of the US–Iran war, the worldwide energy shortage is at the forefront. Tehran’s closure of the Strait of Hormuz, the strategic chokepoint between the Persian Gulf and the Gulf of Oman, through which nearly a fifth of the global energy trade passes, has triggered energy scarcity and price surges worldwide. The developing economies of South Asia, most of which rely heavily on non-renewable fuels for industrial use, power generation, transport and cooking, are facing significant challenges. The situation is particularly acute for Bangladesh, which has been under considerable economic duress in recent years due to several factors, including significant energy shortages caused by the ongoing Russia-Ukraine war. Navigating the country through this compounded energy crisis is thus a considerable challenge for Bangladesh’s newly elected BNP government, which came to power on 12 February 2026. However, it is also an opportunity to recalibrate the country’s foreign policy and ease ties that had become strained under the interim government.
The situation is particularly acute for Bangladesh, which has been under considerable economic duress in recent years due to several factors, including significant energy shortages caused by the ongoing Russia-Ukraine war.
Bangladesh relies on imports for 95 percent of its oil and 30 percent of its gas requirements. Between January 2025 and February 2026, Bangladesh imported approximately 20.69 lakh tonnes of crude oil, of which around 13 lakh tonnes, or 63 percent of the total, was supplied by the United Arab Emirates, Iraq and Saudi Arabia. The remaining 37 percent was sourced from multiple other countries. The imported crude oil was refined at the state-owned Eastern Refinery Limited into 13 refined petroleum products, including diesel and petrol, before use. Consequently, restricted passage through the Strait of Hormuz has impacted Dhaka’s fuel supply, with the country’s limited storage and procurement flexibility aggravating the deficit.
According to the Institute for Energy Economics and Financial Analysis, Dhaka is running short of more than 1,300 million cubic feet per day. Severe gas shortages have forced Bangladesh to halt operations at four of its five state-run fertiliser factories, and the available gas has been redirected to power plants to avoid widespread outages. To further manage the crisis, the BNP government has already closed all universities, as residential halls, classrooms, laboratories and air conditioning consume substantial electricity. The Eid al-Fitr holidays have also been preponed as part of emergency measures to conserve electricity and ease traffic congestion, which wastes fuel. Additionally, guidelines have been issued encouraging establishments to use electricity more efficiently, maximising daylight use, reducing unnecessary lighting and power consumption. The government has also imposed limits on daily fuel sales to prevent stockpiling and panic buying.
Restricted passage through the Strait of Hormuz has impacted Dhaka’s fuel supply, with the country’s limited storage and procurement flexibility aggravating the deficit.
However, there are already long queues outside filling stations in Dhaka to purchase petrol. As summer approaches, demand for energy supply will rise, worsening electricity shortages in the country. According to energy analysts, the rationing measures can offer only short-term relief for the power sector. A recent study by the South Asian Network on Economic Modelling (SANEM) revealed that Bangladesh’s heavy reliance on imported energy, remittances from the Gulf countries, and global trade networks has left its economy exposed to geopolitical shocks in the Middle East. Therefore, a prolonged US–Israel war on Iran could lower the country’s GDP by as much as 3 percent in the next couple of years.
Authorities are thus at work to stabilise fuel imports and manage distribution. As of early April 2026, Iran’s Security Council has approved safe passage for six Bangladeshi fuel-carrying ships stranded in the Strait of Hormuz. These vessels, including tankers, were permitted to pass through a secured, monitored corridor following diplomatic efforts by the Tarique Rahman administration. The government has also been in talks with major development lenders, including the World Bank, Asian Development Bank (ADB), the Asian Infrastructure Investment Bank, and the International Islamic Trade Finance Corporation, to secure financial support amid rising oil prices. Rashed Al Mahmud Titumir, the Prime Minister’s Adviser on finance and planning, has pointed out that Dhaka is expecting “$1.3 billion from the International Monetary Fund under an existing programme, along with an additional $250 million to $500 million on top of roughly $500 million in budgetary support from the ADB.” Bangladesh is keen to prevent customers from paying exorbitant rates. Loans from the agencies will help regulate fuel prices.
There are already long queues outside filling stations in Dhaka to purchase petrol. As summer approaches, demand for energy supply will rise, worsening electricity shortages in the country.
Limited supply from the Middle East and multilateral funding remain insufficient to sustain the country’s current energy requirements. Hence, the BNP government has increased its imports of refined fuel from its other bilateral sources, such as the US, facilitated by the February 2026 trade deal, which includes provisions for Bangladesh to increase imports of energy products, including oil and liquefied natural gas (LNG), from the US. Between January 2025 and early February 2026, Dhaka imported 25.86 lakh tonnes of LNG, of which 16.52 lakh tonnes, or 64 percent, came from Qatar. Of the remaining 36 percent, the United States supplied 4.36 lakh tonnes, or 17 percent. In the same period, Bangladesh imported 15.87 lakh tonnes of liquefied petroleum gas (LPG), of which 11.07 lakh tonnes, or 69 percent, came from the Middle East, and the US sold 3.40 lakh tonnes, or 22 percent, of the remaining 31 percent. The US was therefore a significant fuel source for Dhaka. But the deal helped increase imports from the US to 1.73 lakh tonnes, or 62 percent of Bangladesh’s total LPG imports in the last two months, thereby reducing Dhaka’s dependence on the Middle East.
However, while the trade deal with the USA, concluded by the interim government, does help Prime Minister Tarique Rahman in the current crisis, the increased fuel supply from the US comes at a cost. Due to the ongoing turmoil in the Gulf, shipping lines are routing their eastbound cargo via the Cape of Good Hope at the southern tip of Africa, rather than the Suez Canal and the Red Sea. This increases the delivery time by 10–20 days, inflating logistics costs and adding to the skyrocketing oil prices. Hence, it is not a sustainable alternative. Thus, the Bangladesh government is working not only to increase its fuel imports beyond the Middle East but also to diversify its sources to avoid over-dependency on a single partner. While the quest for LNG has led Bangladesh to buy three cargoes on the spot market at higher prices, PM Rahman has begun to rekindle ties with India for other refined oils, particularly diesel, which powers its textile industry. The relationship had become strained under the interim government.
Limited supply from the Middle East and multilateral funding remain insufficient to sustain the country’s current energy requirements.
After the former PM Sheikh Hasina’s ouster from power in August 2024, the India-Bangladesh relationship faltered, compelling New Delhi to stall the expansion project of the India-Bangladesh Friendship Pipeline, which supplied diesel to Bangladesh from the Numaligarh refinery in Assam. However, some media reports also suggest that the interim government had halted the supply of diesel from India, although there is no evidence to back this claim. Nonetheless, after renewed negotiations between India’s Modi government and the current Rahman administration, Bangladesh is set to secure about 45,000 tonnes of diesel from India, of which roughly 27,000 tonnes have already been delivered or are en route by the end of March 2026. The Bangladesh Petroleum Corporation plans to import more than 100,000 tonnes from India this year.
The BNP government has also decided to retain the power purchase agreement with India’s Adani Power, which supplies around 1,400 megawatts of electricity to Bangladesh daily, accounting for nearly 10 percent of the country’s total consumption of 14,000 megawatts. This deal, which had been signed under the former Sheikh Hasina government in 2017, had subsequently come under scrutiny by a review committee set up by the interim government, on grounds of “enormous proof” warranting the agreement to be “scrapped or reconsidered” in accordance with international arbitration laws and procedures. As the committee found that the contract was executed at an unusually high price relative to domestic and international markets, the Rahman government is considering making some alterations to the contract. Nevertheless, it marks the beginning of a renewed functional relationship between the neighbours.
In times of energy disruption, Bangladesh’s experience shows that while global partnerships are necessary, ties with immediate neighbours are particularly essential given the strategic advantages of geography.
Bangladesh’s present energy crisis shows how external conflicts can intensify domestic vulnerabilities in fuel-import-dependent economies. While the BNP government has sought relief through multilateral support and bilateral diversification, the episode also underscores the strategic value of stable ties in the neighbourhood. Cooperation with India on diesel has demonstrated that dependable relations with immediate neighbours can provide timely, practical buffers during wider geopolitical disruptions. This was also witnessed during the COVID-19 pandemic, when India prioritised sending vaccines to Bangladesh under its Vaccine Maitri Programme, and Dhaka reciprocated by supplying medicines and equipment. In times of energy disruption, Bangladesh’s experience shows that while global partnerships are necessary, ties with immediate neighbours are particularly essential given the strategic advantages of geography. In the long run, Bangladesh’s energy security will depend not only on diversified sourcing but also on nurturing stable regional partnerships that can cushion future shocks.
Sohini Bose is an Associate Fellow with the Strategic Studies Programme at the Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Sohini Bose is an Associate Fellow at Observer Research Foundation (ORF), Kolkata with the Strategic Studies Programme. Her area of research is India’s eastern maritime ...
Read More +
PREV
