World Oil Price Hits $110 a Barrel, Raising Alarm for Import-Dependent Bangladesh

Renewed conflict spreading across the Middle East has pushed the world fuel oil price to $110 a barrel. Drone attacks on Saudi Arabia's civilian infrastructure and oilfields, increased attacks on commercial ships in the Red Sea and the Gulf region, and an alarming fall in US oil stocks have created intense uncertainty in the international market over supply and transport systems.

Crude oil prices have stayed around this high level all week. On Tuesday, the price rose to $111.75, its highest in five months. In other words, the current price is not a one-day spike — this sustained high level itself shows the depth of the market's instability.

According to the ship-tracking organisation Kpler, at least 18 commercial vessels have been attacked in the past two weeks in the area from outside the Strait of Hormuz to the Gulf of Oman. As a result, shipping rents and insurance risks in the region have multiplied. This has created major obstacles to oil extraction, transport by ship, and ship-to-ship oil transfer operations.

Under the influence of high prices and geopolitical instability, a major contradiction has appeared in the world economy over fuel demand and supply. According to the International Energy Agency's (IEA) latest forecast, because of the conflict's impact, high prices and economic slowness, world oil demand in the last quarter of 2026 could fall by 2.5 million barrels a day compared with the previous year, and average demand across the whole year could fall by about 2.6 million barrels.

In contrast, global annual oil supply this year is feared to fall by an average of 5.8 million barrels a day. In addition, world commercial oil stocks fell by 10 million barrels in September alone, which is about 509 million barrels less than at the end of last February. This large fall in stocks has made the supply strain still clearer.

In such a situation, although there is a risk of prices rising further on fears of a supply crisis, analysts believe the upward movement may remain somewhat limited if global fuel demand falls because of economic slowness. In other words, a supply crisis is pushing prices up on one side, while weak demand holds that pace back somewhat on the other — and the world energy market is now caught in that tug of war.

This prolonged instability in world oil prices has become a major cause of concern for import-dependent Bangladesh's economy. If oil prices stay high in the international market, the country's import costs will jump sharply at a stroke, which will have a direct negative impact on its foreign currency reserves.

At the start of each month, the government fixes fuel oil prices in the country by executive order, so world market prices are not reflected immediately. But if the government's capacity to provide subsidies shrinks, prices may ultimately have to be raised in the local market too. That very possibility is now changing the calculations of everyone from importers to ordinary consumers.

If fuel prices rise in the local market, the operating costs of electricity generation, farm irrigation, public transport and industrial factories will all increase at once. And that could raise the overall cost of living and further fuel the country's existing high inflation. In other words, the shock of world prices could ultimately land on every family's monthly expenses.

Deep concern over the country's overall economic situation has been expressed by Selim Raihan, a teacher in Dhaka University's economics department and executive director of the private research organisation SANEM. In his view, a bigger cause for alarm than the oil price rise itself is long-term economic uncertainty, because of which private-sector investors cannot take any future decisions.

According to Selim Raihan, as a result Bangladesh faces being trapped in a prolonged trap of low growth and high inflation. He also believes there is a lack of clarity in the government's policy outline on how the country will emerge from the existing crisis. Alongside concern over fuel prices, this policy vagueness is what is blocking investment and planning the most, in his view.

While viewing positively the government's emphasis on expanding renewable energy as an alternative, the economist recalled past failures to achieve targets in this area. He urged the immediate adoption of a coordinated and implementable policy. Which way the world market situation turns will now decide the coming days' calculations for Bangladesh's fuel costs, reserves and inflation.