How the Iran war is pushing energy, freight, fertilizer, and trade risk through Bangladesh’s garment industry
Just over five weeks after the February 28 U.S.-Israeli strikes on Iran, Bangladesh’s garment sector is dealing with more than a burst of higher oil prices. The conflict has settled into the cost structure, with energy, freight, insurance, air cargo, fertilizer, and working capital all under pressure at the same time. For a country that depends on imported fuel and tight shipping calendars, that is a serious problem.
The oil market shows how far this has gone. Reuters’ latest monthly poll still puts average Brent at $82.85 a barrel for 2026, up from $63.85 in February, before the war, while WTI is seen at $76.78, up from $60.38. But prompt prices are running far above those annual averages.
On April 2, Brent settled at $109.03 and WTI at $111.54 after President Trump said U.S. attacks would intensify. These are no longer panic prices from a bad weekend. They reflect a market pricing in prolonged risk around flows, routing, and security.
In Bangladesh, higher oil prices do not stop at the pump. They run through electricity, diesel for backup generation, transport, packaging, chemicals, synthetic inputs, and freight. A factory in Gazipur does not buy crude directly, but it pays for the entire chain that crude supports. When energy stays expensive, every weak point starts to show.
Dhaka has moved into fuel-saving mode
The clearest change since the first days of the war is the Bangladeshi government’s response. Dhaka is now managing this as an energy emergency. Under measures announced on April 3, government offices will run from 9 a.m. to 4 p.m., markets and shopping centers must close by 6 p.m., and industry is under pressure to reduce power use.
The government is also trying to secure more than $2.5 billion in outside financing to cover fuel and LNG imports. That is the posture of a country under strain, not one expecting normal conditions to return quickly.
The dependence is severe. Bangladesh, a country of about 175 million people, imports roughly 95% of its energy needs. Reuters reported in late March that Dhaka was seeking a waiver to import up to 600,000 metric tons of Russian diesel and was set to bring in 40,000 metric tons from India’s Numaligarh Refinery in April, nearly double the March volume.
Earlier reporting from BGMEA said power cuts had doubled to as much as five hours a day after the war began. Since then, Dhaka has widened fuel rationing, cut fuel station hours, and kept looking almost everywhere for supply.
The strain is now reaching deeper into the industrial base. On March 5, Bangladesh shut four of its five fertilizer plants to conserve gas. That says a great deal about where the system stands. When fertilizer production is cut to preserve fuel for the broader economy, the damage has already moved beyond shipping delays and into the real operating base of the country.
Freight is still wrecking the calendar
Logistics remain a major problem. The first blow hit air cargo. Gulf airlines suspended flights, and garment shipments for brands such as Inditex, Marks & Spencer, Next, and Primark piled up in Bangladesh and India. More than half of Bangladesh’s air cargo usually moves through Gulf carriers, so the disruption was immediate.
Reuters reported in mid-March that spot air freight from South Asia to Europe had jumped 70% to $4.37 per kilogram, while South Asia to North America was up 58% to $6.41. By early April, Xeneta said global air cargo spot rates in March had reached $2.86 per kilogram, the highest since December 2024, while regional capacity remained about 30% below pre-conflict levels. In a business built on short lead times, those are painful numbers.
Sea freight has offered little relief. Maersk, Hapag-Lloyd, and CMA CGM have rerouted vessels around Africa rather than move through Hormuz, Suez, and the Bab el-Mandeb in the usual pattern.
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The diversions via the Cape of Good Hope are still adding 10 to 14 days to transit times and now bring war-risk, emergency conflict, and deviation surcharges of $1,500 to $3,300 per standard container, with specialized equipment costing as much as $4,000. Even goods that never touch the Gulf get hit once boxes, vessels, and schedules fall out of position.
There is another danger here. The Houthis have re-entered the fight, which raises the risk of more pressure on the Red Sea. Bangladesh has already lived through one round of longer Cape routings. If the Red Sea remains dangerous while Hormuz also stays disrupted, neither of the main corridors to Europe can be treated as dependable. In that kind of market, delivery promises weaken and margins get thinner.
Fertilizer pressure is working its way back to cotton
The cotton risk starts upstream. Reuters reported in mid-March that Middle East urea export prices had jumped about 40% to just above $700 per metric ton from just under $500 before the war. On April 3, the FAO said its food price index rose 2.4% in March and warned that if the conflict lasts more than 40 days, high input costs could push farmers to cut fertilizer use, reduce planting, or switch crops. That matters to textiles even if cotton prices have not yet fully caught up.
Cotton is only one crop competing for fertilizer, but it is still exposed. If growers in the United States, India, Pakistan, or West Africa cut nitrogen use or rethink acreage because fuel and fertilizer costs stay high, Bangladesh will feel it later through tighter fiber supply and higher yarn costs. A mill can sometimes survive an expensive month of freight. A season of weaker yields, lower fiber quality, or higher yarn prices is harder to absorb, especially when buyers are still pushing on price.
Bangladesh has added its own complication by shutting most of its fertilizer plants. If domestic urea output stays constrained while imported supply also tightens, the country becomes more dependent on foreign supply at the same time that foreign exchange is under pressure. Even if cotton is not directly rationed, garments still end up competing for dollars, fuel, and policy attention.
The trade picture is mixed
Not every new development is negative. In February, Bangladesh reached a new agreement with Washington that set a general U.S. tariff rate of 19% and opened a duty-free channel for certain textile and apparel goods made with U.S.-produced cotton and man-made fiber. That could create a modest opening for exporters willing to redesign supply chains around American inputs.
Still, that benefit lands in a very difficult market. Data released on April 2 show Bangladesh’s March merchandise exports were $3.48 billion, down 18.07% year over year, while apparel exports fell 19.35% to $2.78 billion. For July through March, total exports were $35.39 billion, down 4.85%, and apparel exports were $28.58 billion, down 5.51% from a year earlier. So the industry now has a somewhat better trade arrangement with the United States at the same time that energy, freight, and demand conditions have deteriorated.
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The remittance picture is also mixed. March brought record inflows of $3.75 billion, the highest monthly figure Bangladesh has ever recorded. That was 14% above March 2025. For July through March, remittances reached about $26.2 billion, up about 20% from a year earlier, which offers some short-term support for reserves and foreign exchange. But remittances cannot carry the garment sector. They can steady the macro picture for a while. They cannot replace orders, power, or shipping capacity.
What manufacturers should do now
Bangladesh’s manufacturers need to plan for a conflict that lasts well into the second quarter and reaches into buying decisions for the second half. That means talking to customers now about lead times, escalation clauses, air freight exceptions, and payment discipline. It means securing diesel, checking backup generation, and deciding which product lines justify scarce capacity if power stays intermittent. It also means taking the U.S. tariff deal seriously enough to ask whether more American cotton or man-made fiber can be built into programs that would otherwise be too exposed.
Buyers should draw the obvious lesson. Bangladesh remains a major sourcing platform with scale, skill, and deep industrial experience. But cheap FOB prices lose some of their appeal when fuel, insurance, transit time, and inventory exposure all move against the same order at once. Energy, logistics, and raw materials are part of the same system. When one part breaks, the economics of the whole program change.
This war may still end before summer. Even so, the market has already learned something important. Hormuz, the Bab el-Mandeb, LNG dependence, fertilizer exposure, backup power, and routing risk all carry more weight than many sourcing models allowed for. Bangladesh’s garment industry can get through this. It has survived severe shocks before. But the cost of staying competitive is rising, and labor plus scale is no longer enough by itself.
