Exporters concerned as conflict spreads across the Middle East

The United States and Israeli joint forces attacked Iran on Saturday morning. In response, Iran has targeted American bases in various Middle Eastern countries, including Israel.

Due to the attacks and counter-attacks, all air communication in the region has been temporarily suspended, and Iran has closed the Strait of Hormuz for all types of ships.

Although Bangladesh's exports to Iran are minimal, the Middle Eastern countries represent new markets for Bangladeshi products.

Exporters are concerned that these conflicts and counter-attacks across the Middle East may disrupt product exports to these countries.

They also fear that the closure of the Strait of Hormuz will increase the cost of exporting goods.

According to international media, Iran has conducted attacks on the United Arab Emirates (UAE), Qatar, Bahrain, Saudi Arabia, and Iraq in response to the US and Israeli attacks. Among these countries, the UAE is a major market for Bangladesh.

Due to various sanctions from the US and its allies, bilateral trade between Bangladesh and Iran is very low, slightly more than 10 million dollars, with a large portion being Bangladesh's exports. Trade rose somewhat a year after the pandemic, but it has been declining for two consecutive fiscal years.

According to the Export Promotion Bureau (EPB), in the last fiscal year of 2024-25, Bangladesh exported 10.9 million USD worth of goods to Iran. This included 10.832 million USD worth of jute yarn, 95,310 USD of knitwear, and 9,351 USD of woven apparel.

In the fiscal year 2020-21, Bangladeshi exporters shipped goods worth 15.9 million USD to Iran. The next year, this fell to 11.9 million USD. In 2022-23, exports rose to 18 million USD but decreased again to 15.4 million USD in the subsequent fiscal year.

Bangladeshi businesses imported goods worth 500,000 USD from Iran in the 2024-25 fiscal year, according to Bangladesh Bank. There were no formal imports from the country in the previous three years. Additionally, in the 2020-21 fiscal year, 300,000 USD worth of goods were imported from Iran.

Historical data shows that imports from Iran were higher about a decade ago.

In the 2010-11 fiscal year, goods worth Tk 4.49 billion were imported from Iran. From the next year, imports began to decline, with Tk 990 million worth of goods imported in the 2011-12 fiscal year.

When asked, BKMEA president Mohammad Hatem told Prothom Alo, “Due to trade sanctions from the US and their allies, our business with Iran is very limited. However, as tensions spread across the Middle East, there could be a negative impact on trade and exports.”

Mohammad Hatem further stated, “We have not yet recovered from the effects of the Russia-Ukraine war. Now, with the US and Israel starting a conflict with Iran, the closure of the Strait of Hormuz will increase the cost of transporting goods by ship. Additionally, with the airspace closed, cargo planes are not operational, raising concerns about disruptions in product exports.”

Among the Middle Eastern countries where conflicts have spread so far, the UAE and Saudi Arabia are emerging markets for Bangladeshi goods. More products are exported to other markets than to Iran. Apparel, frozen fish, processed foods, vegetables and fruits, caps, shoes, and other items are exported to these countries.

HIFS Agro Food Industries exports processed food worth 200,000-300,000 USD monthly to the UAE, Saudi Arabia, Oman, and Qatar. If the situation does not stabilise soon, the company's CEO, Syed Muhammad Shoaib Hassan, fears a significant decline in exports.

He told Prothom Alo last night that nearly half of processed food exported from Bangladesh is sent to the Middle East. Most companies have stumbled due to restrictions in India. Now, if instability in the Middle East persists, many food processing exporters could face threats.

According to the EPB, 407.9 million USD worth of goods were exported to the UAE in the 2024-25 fiscal year, which is 23 million USD more than the previous fiscal year.

Additionally, 246.2 million USD worth of goods were exported to Saudi Arabia in the last fiscal year, 10.6 million USD more than the previous fiscal year.

Goods worth 26 million USD were exported to Qatar, 25.4 million USD to Kuwait, 9 million USD to Bahrain, and 2.7 million USD to Iraq from Bangladesh in the last fiscal year.

When asked, MA Razzaq, chairman of the private research institute RAPID, told Prothom Alo that it is too soon to say how much the Middle Eastern conflict will impact trade and business.

However, oil prices have been affected, and LNG prices could rise, putting pressure on reserves.

Additionally, many Bangladeshis work in the Middle East, and if their workplaces are affected, they may not receive salaries, resulting in a decline in remittances.

Under the current circumstances, the government needs to monitor the situation carefully and be prepared to take necessary actions when needed.