Published: 10:11 AM, 15 March 2026 Last Update: 10:15 AM, 15 March 2026
Dollar Market Volatility: Middle East War and Economic Pressure on Bangladesh
Amir Mohammed Khosru
The recent geopolitical tensions in the Middle East have once again pushed the global economy toward instability. The shock of war is no longer confined to the regions where conflicts occur; its ripple effects are now visible across global energy markets, trade, and financial systems. We are facing the same reality. The recent volatility in the dollar market is closely linked to the conflict in the Middle East, the possibility of rising energy prices, and the growing pressure of import costs.
Until the end of February, the exchange rate of the dollar against the Taka remained relatively stable. However, since the beginning of March, pressure has gradually started to build in the market. According to data from Bangladesh Bank, the average exchange rate of the dollar in the interbank market has reached Tk 122.69. The previous day the rate was Tk 122.58. Earlier, it was Tk 122.49 on Monday and Tk 122.43 on Sunday. In other words, within just a few days the price of the dollar has increased step by step. This is being viewed as a warning signal in the market.
Banks have now taken a cautious position in dollar transactions. Many banks are trading dollars at higher rates themselves, while demanding even higher prices when opening import letters of credit (LCs). In some cases, the dollar is being calculated at Tk 122.90 to Tk 123 while opening LCs. Even in forward dollar sales, higher prices are being observed. As a result, a psychological pressure has developed in the market, which signals the possibility of further instability in the future.
The actual shortage of dollars is not yet very visible. Remittance inflows and export earnings have not collapsed. However, banks are taking precautionary measures in anticipation of potential risks. If the Middle East conflict becomes prolonged, its impact may reach our economy through several channels.
First, through instability in the energy market. We import a large portion of its energy needs. If the international prices of oil and LNG rise, the country’s import bill will increase rapidly. In the past, we have seen that whenever a global conflict emerges, energy prices tend to surge quickly. If this situation persists for a long time, additional dollars will be required to finance energy imports, which will create pressure on the foreign exchange market.
Second, a large number of our workers are employed in the Middle East. If economic activities there become unstable or employment opportunities are affected, there is a risk that remittance inflows may decline. Remittances are one of the main sources of our foreign currency earnings. Even a small disruption in this flow could directly affect the dollar market.
Third, if global commodity prices increase, additional spending will be required to import food, fertilizer, fuel, and industrial raw materials. During the Russia–Ukraine war, we experienced a similar situation. At that time, rising import costs combined with declining dollar inflows caused the foreign exchange reserve to fall rapidly.
In this context, the country’s foreign exchange reserves are currently in a relatively comfortable position. According to the International Monetary Fund’s calculation, reserves stand at around 29.38 billion dollars, although the central bank’s total estimate is somewhat higher. However, past experience suggests that if a major global shock occurs, these reserves can decline quickly.
Between 2021 and 2025, the central bank sold nearly 25 billion dollars from its reserves to meet various import payments. Most of this spending went toward importing fuel, food, and fertilizer. As a result, policymakers now have to proceed with much greater caution.
Recently, the central bank has reduced its direct intervention in the dollar market. In the past, it used to supply dollars from the reserves to stabilize the market. Now that tendency has declined. As a result, the price of the dollar is increasingly being determined by market demand and supply, which naturally can increase volatility.
According to economists, the biggest challenge in this situation will be controlling import costs and maintaining careful management of the dollar market. In the case of energy imports, long-term planning is essential. It is necessary to determine the likely demand for the next six months or one year and arrange financing accordingly.
In this regard, alternative sources of financing should also be explored. For example, energy imports could be financed through low-interest loans from the Asian Development Bank or other multilateral institutions. This would help reduce pressure on the reserves.
At the same time, importance should be given to bringing foreign investment and development project funds into the country more quickly. At present, many development projects are progressing slowly. If these projects accelerate, the inflow of foreign funds may increase, which would help expand the supply of foreign currency.
On the other hand, controlling unnecessary imports is also important. During past crises, the government restricted the import of certain luxury goods. If necessary, such measures may once again be considered.
The most important factor, however, is maintaining confidence in the market. When rumors or panic spread in the dollar market, the resulting instability often becomes greater than the actual crisis itself. Therefore, policymakers must ensure transparent information disclosure and timely policy decisions.
Over the past few decades, our economy has managed to withstand many global shocks. But the current global situation is becoming increasingly uncertain. If the Middle East conflict continues for a prolonged period, its effects will not remain limited to the energy market; they may spread across global trade, investment, and financial markets.
In that reality, what we now need most is caution, foresight, and discipline in economic management. Even a small disturbance in the foreign exchange market can gradually turn into a major crisis. Ultimately, the burden of such a crisis falls on the everyday lives of ordinary people.
The war in the Middle East may be happening thousands of miles away, but its economic echoes are already being heard in our dollar market. The challenge now is to recognize these signals in time and take the necessary preparations. Otherwise, the country may once again find itself vulnerable in the face of a global economic storm.
Amir Mohammed Khosru is
a banker and a columnist.
