Bangladesh’s progress in reducing poverty faces a fresh setback as the economic fallout from the Middle East conflict adds to existing pressures from high inflation, weak employment and stagnant household incomes.
Around 1.4 million people are estimated to have fallen into poverty in Bangladesh during 2025, according to an assessment by the World Bank. Without a war in the Middle East, around 1.7 million people could have moved out of poverty in 2026. However, the conflict could reduce that number to roughly 500,000.
That means around 1.2 million people could lose the opportunity to escape poverty because of the economic consequences of the conflict, the World Bank has warned.
The assessment, conducted in mid-June as part of a proposed project to provide budget support to the government, highlights several risks facing Bangladesh’s economy. The World Bank found that the benefits of economic growth had not adequately reached ordinary households because of persistent inflation, limited employment opportunities and weak income growth.
The Middle East conflict has now introduced another layer of pressure. Higher fuel prices, gas shortages, disruptions to industrial production and reduced fertiliser production are affecting transport, agriculture, consumer prices and household earnings. If the crisis continues for an extended period, around 600,000 jobs could be at risk, according to the World Bank.
Inflation could deepen pressure on poorer households
The impact of the conflict is also expected to be felt through higher prices. The World Bank estimates that rising prices could account for around 10 per cent of the increase in poverty in Bangladesh this year.
If higher energy costs are gradually passed on to consumers, inflation could rise by more than 0.5 percentage points. Increased fuel costs would raise expenses across transport, electricity generation and industrial production. Businesses facing higher operating costs could eventually pass those costs on to consumers, putting further pressure on the prices of food and other essential goods.
Poorer households are particularly vulnerable because a larger share of their income is generally spent on basic necessities. Even a relatively modest rise in food, transport or energy costs can therefore reduce their purchasing power.
Finance and Planning Minister Amir Khosru Mahmud Chowdhury, however, has said that inflation fell below 9 per cent in July. He also believes inflation could have declined further had there been no war in the Middle East.
Bangladesh exposed to energy market volatility
The energy sector is among the areas most directly exposed to the conflict. More than half of Bangladesh’s primary energy supply comes from natural gas, yet domestic gas production has fallen by about 15 per cent from its peak level in 2016.
Bangladesh is also significantly dependent on the Middle East for imported energy. Between 60 and 65 per cent of its imported crude oil comes from the region, while the Middle East accounts for between 55 and 60 per cent of the country’s liquefied natural gas imports.
Amid the disruption in international energy markets, five of Petrobangla’s six liquefied natural gas supply contracts have been declared subject to force majeure. Spot-market liquefied natural gas prices have climbed to around $24–$28 per million British thermal units, more than double previous levels.
Bangladesh also had to pay more than $24 per unit for two liquefied natural gas cargoes scheduled for September delivery.
The higher cost of imported energy is putting additional pressure on public finances. The World Bank estimates that government energy subsidies could reach 2.8 per cent of gross domestic product in the 2025–26 financial year. Overall subsidy pressures could rise to between $2.5 billion and $4.8 billion.
Such an increase could limit the government’s ability to spend on other priorities, including social safety-net programmes.
Agriculture faces a separate supply risk
The energy crisis is also affecting agriculture, a sector on which around 40 per cent of Bangladesh’s population depends in some way.
Fertiliser production itself requires gas, making the agricultural sector vulnerable to disruptions in domestic gas supplies. Of six urea fertiliser plants in the country, five have already had to suspend production because of gas shortages.
Bangladesh uses an average of 391.9 kilograms of fertiliser per hectare, more than twice the global average. Urea prices have already risen by around 30 per cent, while the World Bank has warned that prices could double if the crisis persists.
Higher fertiliser costs would increase farmers’ production expenses, with small farmers likely to face the greatest difficulty in absorbing the additional burden. Any sustained disruption to fertiliser supplies could also affect agricultural production costs and, ultimately, food prices.
Employment under growing pressure
The conflict is also creating concerns about employment in the industrial sector.
Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said the impact of the energy crisis on jobs was already becoming visible. According to him, new gas connections are not being provided to industrial establishments, while some factories have reduced working hours and others have been forced to close because of fuel shortages.
Factory closures and job losses directly affect household incomes. For workers already struggling with high living costs, reduced working hours or unemployment can quickly push families towards financial insecurity.
The World Bank’s estimate of around 600,000 jobs being at risk therefore adds another dimension to the country’s poverty outlook. A prolonged employment shock could weaken household consumption while making it harder for vulnerable families to cope with rising prices.
Healthcare costs could also rise
The consequences extend beyond energy, agriculture and industry. Bangladesh’s healthcare sector is also exposed to higher operating and import costs.
The country has around 19,000 government health centres and approximately 6,200 private hospitals and clinics. When electricity supplies become unreliable, private healthcare facilities may have to rely on generators, increasing their fuel and operating expenses.
Bangladesh also has around 250 pharmaceutical manufacturers that import raw materials for medicine production. More than 90 per cent of hospital equipment is dependent on imports.
This means disruptions to international supply chains and higher energy costs can raise expenses throughout the healthcare system. Those additional costs can eventually place pressure on both healthcare providers and patients.
The latest assessment therefore presents a broad economic risk rather than a problem confined to one sector. Bangladesh entered 2026 after an estimated 1.4 million people had fallen into poverty in 2025. There had been scope for poverty to decline this year, with millions potentially benefiting from improved economic conditions.
The Middle East conflict has weakened that prospect. Higher energy costs, rising production expenses, pressure on employment, agricultural supply risks and persistent inflation could together make poverty reduction considerably more difficult.
For Bangladesh, the challenge is not simply to contain the immediate effects of higher fuel and energy prices. The wider concern is whether the disruption will continue long enough to undermine household incomes, employment and access to essential goods and services—areas that directly determine how quickly vulnerable people can move out of poverty.