Bangladesh could face the loss of around 600,000 jobs if the economic shock caused by the Middle East conflict persists, while progress in reducing poverty could also slow sharply, according to a World Bank assessment.

The warning comes as the conflict is already being felt across Bangladesh’s economy. Higher energy prices, gas shortages and disruptions to industrial production are putting pressure on transport, agriculture and manufacturing, while rising costs threaten to push up food prices and squeeze household incomes.

The World Bank’s assessment, prepared in mid-June as part of a proposed project to provide budget support to the government, highlights the vulnerability of an economy that was already under considerable strain. Inflation remains high, the banking sector is facing weaknesses and the government has limited fiscal room to respond to new shocks.

Poverty has also become a growing concern. The World Bank estimates that the number of people living in poverty increased by around 1.4 million in 2025. This year, Bangladesh could have seen roughly 1.7 million people move out of poverty if the Middle East conflict had not occurred. The figure could now fall to about 500,000.

That means a large number of households that might otherwise have improved their economic position could remain vulnerable.

Energy costs pose a major threat

One of the clearest channels through which the conflict is affecting Bangladesh is energy. The country relies heavily on imported fuel, particularly liquefied natural gas, or LNG. More than half of Bangladesh’s primary energy supply comes from gas, while domestic gas production has fallen by about 15 per cent from its peak in 2016.

The country’s exposure to the Middle East is also significant. Around 60–65 per cent of imported crude oil and 55–60 per cent of imported LNG come from the region. Any major disruption to supplies or shipping routes can therefore quickly translate into higher costs for Bangladesh.

International LNG prices have risen sharply amid supply uncertainty, reaching around US$24–28 per million British thermal units in the spot market. Bangladesh has also had to pay more than US$24 per unit for two LNG cargoes scheduled for September delivery.

Five of Petrobangla’s six LNG supply contracts have reportedly been declared under force majeure conditions, reflecting the disruption facing suppliers.

Higher fuel prices do not affect only the energy sector. Transport becomes more expensive, electricity generation costs rise and factories face higher production expenses. Businesses may eventually pass those additional costs on to consumers, putting further pressure on household budgets.

The World Bank estimates that if higher fuel costs are gradually passed on to consumers, inflation could rise by more than 0.5 percentage points. Rising prices could account for around 10 per cent of the increase in poverty expected this year.

Agriculture faces another pressure point

The energy shock is also affecting fertiliser production, creating risks for farmers and food security.

Five of Bangladesh’s six urea fertiliser plants have reportedly had to suspend production because of gas shortages. At the same time, urea prices have increased by around 30 per cent, while a prolonged supply disruption could potentially push fertiliser prices to twice their current levels.

Bangladesh is particularly sensitive to such changes because agriculture remains an important source of livelihoods. Around 40 per cent of the population depends on agriculture in some form.

The country also uses large quantities of fertiliser. Average fertiliser use stands at about 391.9 kilograms per hectare, more than twice the global average. Any prolonged disruption in fertiliser supplies could therefore increase production costs for farmers and eventually affect food prices.

Small farmers would be especially vulnerable. Higher fertiliser and fuel costs can reduce their margins, while shortages may make it harder for them to maintain production.

Bangladesh has faced similar pressure before. Following Russia’s invasion of Ukraine, global energy and fertiliser prices surged, contributing to higher food prices in Bangladesh and increasing the government’s spending on agricultural subsidies. The current crisis is creating a comparable combination of energy, food and fiscal pressures.

Government subsidy burden could rise

Higher energy prices are also creating a challenge for public finances. The World Bank estimates that government energy subsidies could rise to 2.8 per cent of gross domestic product in the 2025–26 financial year.

Overall subsidy costs could reach between US$2.5 billion and US$4.8 billion, compared with roughly US$1.5 billion to US$2.5 billion in recent years.

For a government already facing limited fiscal space, the additional burden could mean difficult choices over public spending. The World Bank has warned that pressure on the budget could eventually affect spending on social protection and other essential areas.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury has acknowledged that the country’s underlying economic problems cannot be resolved overnight. He has also said that inflation fell below 9 per cent in July and suggested that it could have declined further had the Middle East conflict not disrupted global markets.

Health sector also exposed

The impact of the crisis extends beyond factories and farms. Bangladesh’s health sector is also exposed to rising energy and import costs.

The country has around 19,000 government health facilities and 6,200 private hospitals and clinics. Electricity and fuel shortages can increase operating costs, particularly when private facilities have to rely on generators during power disruptions.

Around 250 pharmaceutical manufacturers also depend on imported raw materials. More than 90 per cent of medical equipment used by hospitals is imported, leaving the sector vulnerable to higher shipping, fuel and supply-chain costs.

The World Bank has warned that such additional expenses could weaken the ability of health facilities to provide services at a time when the sector is already under pressure.

Jobs could become the biggest casualty

The employment outlook is perhaps the most immediate concern. Higher production costs, gas shortages and disruptions to industrial activity can force factories to reduce operating hours, suspend production or reconsider expansion plans.

Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said signs of this pressure were already visible. According to him, some factories are operating for shorter hours, new gas connections are not being provided in some cases and certain industrial units have been forced to close because of energy shortages.

If the disruption continues, the consequences could spread well beyond individual factories. Lower production means fewer working hours and weaker demand for labour, while businesses facing higher costs may delay recruitment or reduce their workforce.

The World Bank’s estimate of around 600,000 potential job losses therefore underlines the wider economic risk. For a country already struggling with high inflation and weak income growth, prolonged energy disruption could create a cycle in which rising costs weaken businesses, weaker businesses reduce employment and falling household incomes further constrain consumer demand.

The scale of the eventual impact will depend heavily on how long the Middle East conflict lasts and how global energy and commodity markets respond. For Bangladesh, the immediate challenge is to protect employment and household incomes while maintaining energy supplies and keeping essential public spending intact.