- Rerouted shipping, rising freight costs and delays are straining Bangladesh’s multibillion-dollar garment exports

- Surging fuel prices and gas shortages are squeezing manufacturers, raising concerns over long-term competitiveness and potential shifts in global sourcing

DHAKA, Bangladesh

The steady hum of sewing machines across Bangladesh’s vast garment belt – long a symbol of one of the world’s fastest-growing export economies – is beginning to falter under the weight of a crisis unfolding thousands of miles away.

The US-Israel war with Iran has unsettled shipping routes, rattled energy markets and injected a new layer of uncertainty into an industry that forms the backbone of the South Asian nation’s economy.

The ready-made garment sector, which accounts for more than 80% of Bangladesh’s export earnings – over $48 billion last year – and employs roughly 4 million workers, was already navigating a period of stress before the latest tensions erupted.

The new shock now threatens to deepen that downturn.

Official trade data show that apparel exports to the EU – Bangladesh’s largest market – fell to $1.55 billion in January 2026, marking a sharp 25.25% decline compared with a year earlier.

Export volume dropped by 17.49%, while the average unit price slipped by 9.41%, underscoring what analysts describe as a “double blow” of weakening demand and falling prices amid regional instability.

That fragility has heightened alarm among exporters.

“Now, with the Iran conflict, there are fears that exports will drop further,” Inamul Haq Khan, senior vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Anadolu.

The organization’s president, Mahmud Hasan Khan, issued a similar warning last week, saying the Iran war had “emerged as a fresh threat to the sector by destabilizing both logistics and energy costs.”

Rising shipping costs and delays

The risks are rooted as much in geography as in economics.

The Gulf region sits astride some of the world’s most critical maritime routes linking Asia to Europe. Any disruption – whether due to security risks, higher insurance premiums or vessel rerouting – has immediate consequences for Bangladesh’s export pipeline.

Shipping companies have already begun adjusting routes to avoid high-risk areas, adding days or even weeks to delivery schedules.

Freight costs, which had only recently eased after pandemic-era disruptions, are climbing again. Industry participants report that war-risk insurance premiums for vessels transiting volatile regions have surged, pushing up overall logistics expenses.

The Dhaka Chamber of Commerce and Industry (DCCI) has warned that a prolonged escalation could significantly increase shipping costs, further eroding competitiveness at a time when global buyers are demanding lower prices.

In a March 11 statement, the chamber pointed to “a series of macroeconomic challenges, including higher electricity production costs, inflation driven by transport hikes, and potential interruptions in remittance flows from the Middle East.”

Energy pressures intensify

Energy has emerged as one of the most immediate vulnerabilities.

Bangladesh depends heavily on imported fuel, including liquefied natural gas (LNG), much of which is tied to global benchmarks shaped by Middle Eastern markets.

As tensions push oil and gas prices higher, manufacturers are facing rising operating costs – particularly for electricity and captive power generation – at a time when passing those costs on to buyers is extremely difficult.

The strain is already visible in industrial hubs around Dhaka and Chattogram, where factory owners report rising fuel and utility expenses.

Small and mid-sized manufacturers appear especially exposed.

Sazzad Amin, owner of a mid-sized garment factory in Gazipur, said his operations have already been scaled back.

“Since this crisis escalated, there is a gas shortage in my factory,” he said. “We’re now running a single shift to cover fuel and utility costs.”

Some businesses are operating on increasingly thin margins, while others are reconsidering expansion plans amid growing uncertainty.

“The government is trying everything to make sure that the industrial belt gets enough fuel supply so that they can get their operations running,” said Rashed Al Mahmud Titumir, economic and planning adviser to Prime Minister Tarique Rahman.

“The government also didn’t increase gas prices, keeping the industrial sector in mind,” he told Anadolu.

Financial strain grows

However, keeping domestic gas prices stable despite rising import costs is putting pressure on public finances, without fully shielding the sector from global volatility.

Bangladesh has turned increasingly to the spot LNG market in the absence of long-term contracts, exposing it to sharp price swings.

Prices have surged in recent months, reaching $28.28 per million British thermal units (mmBtu), up 183% from around $10 in January.

To manage the pressure, the government is seeking external financing.

Titumir said Bangladesh is in discussions with major development partners, including the Asian Development Bank (ADB), the World Bank, the International Islamic Trade Finance Corporation and the Asian Infrastructure Investment Bank.

He indicated the country expects to receive about $1.3 billion from the International Monetary Fund under an existing program, along with an additional $250 million to $500 million. This would be complemented by roughly $500 million in budget support from the Asian Development Bank.

Still, analysts warn that the broader economic impact could be significant.

A recent Global Trade Analysis Project (GTAP) assessment suggests a prolonged Middle East conflict could shave up to 3% off Bangladesh’s GDP, largely due to trade disruptions and rising energy costs.

Given the garment sector’s central role in exports and foreign exchange earnings, it would bear the brunt of that impact.

Structural risks to competitiveness

Beyond immediate cost pressures, the crisis is raising deeper concerns about Bangladesh’s long-term competitiveness.

The ready-made garment sector has long relied on low labor costs, scale and reliability. But as shipping becomes slower and more expensive – and energy costs rise – that advantage is increasingly under strain.

The Red Sea crisis that began in late 2023, due to Houthi attacks, had already disrupted supply chains, forcing nearly 70% of apparel shipments to Europe to reroute around Africa’s Cape of Good Hope. That added 10 to 15 days to transit times and pushed freight costs up by between 40% and 250%.

The current crisis has compounded those challenges.

The closure of the Strait of Hormuz has led major carriers including Maersk, Hapag-Lloyd and CMA CGM to suspend operations in parts of the region.

Hundreds of vessels are reportedly idling in the area, while war-risk insurance premiums have risen by up to 50%.

For an industry built on speed and reliability, these disruptions carry serious consequences.

In the fast-fashion sector, even short delays can dent profit margins. Bangladesh’s garment industry operates on margins of less than 4%, leaving little room to absorb additional costs.

Manufacturers are already seeing shifts in global sourcing patterns.

“The problem is that near-shoring is happening in some cases … If this continues, then there will be a structural shift in global sourcing and Bangladesh will lose orders,” said one manufacturer, who requested anonymity.