Pakistan and Bangladesh are experiencing heightened economic vulnerability as the US-Iran conflict escalates, with analysts warning of potential inflationary pressures and rising costs for food, transport, and electricity. Both countries rely heavily on imported fuel, making them particularly susceptible to prolonged spikes in oil and diesel prices.

Jamus Lim, an associate professor of economics at ESSEC Business School Asia-Pacific, highlighted that weak inventory buffers in these economies could lead to a relatively quick impact on domestic prices, resulting in significant inflationary pressure in the near term.

Oil markets have already responded to these tensions, with benchmark Brent crude prices rising nearly 21% to US$84.85 a barrel by July 31, 2026, up from US$70.18 on July 1. West Texas Intermediate (WTI) crude prices increased by a similar margin to US$81.84 a barrel over the same period.

The risks extend beyond the Gulf shipping lanes after a drone strike on gas vessels in Egypt’s Mediterranean port of Damietta raised concerns about shipping security around the Suez Canal, a critical route for Saudi oil exports.

These developments underscore the fragile economic position of Pakistan and Bangladesh amid geopolitical tensions that could quickly translate into higher costs for millions of people in the region.

Sources

South China Morning Post World by Biman Mukherji, published July 31, 2026.