For a week now, Zionist Israel and the Islamic Republic of Iran have been engaged in bitter conflict, destroying property, cities, and both military and civil infrastructure. It began with a massive Israeli attack on Iran’s military and nuclear sites. Several top military commanders and nuclear scientists were killed. Iran responded by firing hundreds of missiles and drones at major cities and towns.
The two warring countries are not next-door neighbors. Aircraft, missiles, and drones must traverse thousands of kilometers across Persian and Arabian territories to strike each other. The escalation has brought the two nations to the brink of a formal war, raising fears of a wider regional or even global conflict. As expected, G7 countries have rallied behind their blue-eyed Israel. Meanwhile, 21 Muslim countries—including Saudi Arabia, Turkey, Pakistan, the UAE, and Egypt—have condemned the Israeli aggression against Iran.
Despite repeated calls from the United Nations, the U.S., the U.K., and the European Union, neither party has shown restraint. Every action is being met with equal vengeance. Given that this region includes major oil and gas-producing and exporting countries, the ongoing conflict could have long-term consequences on the global energy market.
Iran or its sympathizers may target U.S. bases in Jordan, the UAE, or Qatar, or strike at U.S. aircraft carriers. Such actions could draw the U.S.-led Western alliance into direct conflict. Turkey, Pakistan, and a few other countries have vowed to stand by Iran. In this context, the possibility of a global war—or even a nuclear confrontation—is being seriously feared.
The price of crude oil has already spiked. If the conflict persists, the price of all petroleum products—as well as oil-linked energy sources such as gas, LNG, and even coal—may soar. A particularly damaging consequence would occur if Iran strategically closed the Strait of Hormuz through which 20% of total global petroleum trade flows. All countries—whether exporters, importers, developed or developing—will be affected. Asian nations such as Pakistan, India, Indonesia, and Bangladesh will be among the worst sufferers due to price hikes and supply chain disruptions.
As an immediate consequence of the conflict, the following has already occurred:
- Iran's oil exports have dropped sharply; activity at Kharg Island has halted
- The South Pars gas field has been damaged in an Israeli strike
- Israel has shut down nearly two-thirds of its gas production; a refinery has been damaged
Critical energy infrastructure in both Israel and Iran has already been significantly affected in the early days of this escalated conflict. While the worst-case scenarios have not yet materialized, the war is disrupting energy production and exports. Benchmark Brent crude oil prices jumped 10% to over $76 a barrel on Friday after Israel launched an unprecedented wave of airstrikes on Iran, prompting Tehran to fire hundreds of ballistic missiles at Israel. There is a real possibility of crude prices reaching US$100 or more, as happened during the COVID-19 pandemic and the Russia-Ukraine war. Countries reliant on imported fuel will be severely impacted.
The Strait of Hormuz: A Critical Energy Trade Route
The Strait of Hormuz, a vital trade passage between the Gulf of Oman and the Persian Gulf, facilitates around 20% of global petroleum trade. In an extreme situation, if Iran were to close this route even temporarily, it would have a severely damaging impact, not only on fuel trading but also on global trade in general. Shipping and trading costs would rise manifold. The fragile economies of many developing countries like Bangladesh would come under immense pressure.
Investor focus remains firmly on the Strait of Hormuz, the narrow but strategic waterway between Iran and Oman in the Middle East Gulf, through which between 18 and 19 million barrels per day of crude oil and refined fuels flow, accounting for nearly one-fifth of global oil consumption. Additionally, about 85 million tonnes of liquefied natural gas (LNG) from Qatar and the United Arab Emirates passed through the strait last year, representing nearly 20% of global LNG demand.
What Can Bangladesh Do?
Bangladesh’s power generation is now heavily dependent on imported fuel. The current gas demand stands at around 4,000 MMCFD, while the maximum supply, including 1,000 MMCFD of imported LNG, is only 2,800 MMCFD. The interim government, through special efforts, has managed to secure funding and import a few additional LNG cargoes from the spot market, reportedly at US$17–18/MMBTU. Most of the LNG under long-term supply agreements with Qatar and Oman is shipped via the Strait of Hormuz.
Bangladesh now faces two immediate concerns—price volatility and supply disruption. Energy planners must devise contingency plans to prepare for a worst-case scenario. During peak summer, the country cannot afford a major power generation crisis, and at the same time, energy supplies to industries must be maintained without severe disruption.
If the conflict persists, prices of other fuels—LNG and coal—are also likely to rise, as these are closely linked to crude oil prices. Moreover, general trade, including imports and exports, will be impacted if the Strait of Hormuz remains closed, even for a short period.
These impacts will not be limited to Bangladesh alone. It is hoped that the international community will come together to persuade Iran and Israel to end the conflict before it spirals out of control, causing irreversible damage.
Download World As PDF/userfiles/EP_23_1_World.pdf
