Oil prices dropped sharply , falling more than 4%. This wiped out almost all the price increases from earlier in the week. Brent crude (the global gold standard for oil pricing) ended the day at $63.76 per barrel. A geopolitical stalemate is keeping oil prices under pressure. The reality of a massive oil surplus is outweighing military concerns, especially now that the threat of immediate air strikes has subsided despite continued U.S. military positioning in the Middle East.
Earlier this week, observers were worried that the U.S. and Iran were headed for a military conflict. War in the Middle East usually makes oil prices skyrocket because it’s harder to ship oil safely. Tensions eased after President Trump and Iran’s Foreign Minister both made calmer comments, signaling they weren’t looking for a fight. Other neighboring countries successfully convinced the U.S. not to launch military strikes.
Once the fear of war went away, investors looked at the actual numbers, and they don’t look good for high prices.The U.S. has 3.4 million more barrels in storage than expected double what experts predicted. A U.S. blockade is ending, meaning Venezuela will soon start selling its oil to the world again through U.S.
Even though Iran controls the Strait of Hormuz (a vital path for 30% of the world’s sea-shipped oil), experts say there is simply more oil being produced globally than people are buying.The market is resetting. Experts say that even if there are small flare-ups of drama in the future, the fact that there is so much extra oil available will keep prices from staying high for very long. In the world of trading, this was a classic case of people “buying the fear” and then “selling the reality.” [Financial Times]
The energy market is defined by a sharp contrast between localized weather crises and global political standoffs. Natural Gas prices have surged nearly 20% as a massive Arctic blast sweeps across the U.S., sending temperatures 20 to 30 degrees below average and forcing over 200 million people to spike their heating usage. In contrast, Crude Oil prices remain flat, trapped in a geopolitical stalemate where the fear of supply disruptions in Venezuela and Iran is being canceled out by a massive global oil surplus.
However, a new risk is emerging; the Greenland dispute. President Trump’s threat of a 10% tariff on European nations has sparked fears of a Transatlantic trade war, which could slow down Europe’s economy and lower future demand for oil. As these uncertainties pile up ranging from Arctic freezes to territorial disputes investors are flocking to Gold, which has hit a record high of over $4,700 as the preferred “insurance policy” against a volatile global landscape. [Bloomberg]
Oil prices & Middle East tensions
On January 20, 2026, the global markets are showing a shift in focus as the war premium from Middle East tensions begins to fade. While the earlier threat of a conflict in the Strait of Hormuz caused oil prices to spike, the current de-escalation has led to a drop in energy costs, which is now pulling down the prices of agricultural commodities.
This downward trend in food prices is largely due to lower shipping and production costs now that the risk of a regional war has diminished. Simultaneously, the U.S. Dollar is weakening slightly against the Euro and Pound as investors move out of “safe-haven” assets, though global stock indices like the S&P 500 and Nikkei remain in the red. This suggests that while the immediate fear of a Middle East oil crisis has been erased,the market is already pivoting to new uncertainties, such as emerging trade tensions with Europe, keeping investors cautious despite the relief in energy prices. [Reuters]
the U.S. economy presents a “tale of two cities” where high-level growth masks a widening gap between the wealthy and the working class. Despite President Trump’s Liberation Day tariffs on major trading partners and the new threat of a 10% levy on European nations over the Greenland dispute, top-line numbers remain surprisingly resilient, with GDP growing at a healthy 4.3%. This boom, however, is largely driven by a 30% surge in the stock market that has boosted the paper wealth of the top 10% of earners, who now account for half of all consumer spending.
Beneath this surface, the labor market is fracturing; for the first time in 50 years, the U.S. has hit negative net migration, leading to a projected loss of 2 million workers this year and causing job losses in sectors like manufacturing and construction. This has created a phase of jobless growth, where giant tech companies thrive through AI and capital investment while small businesses struggle with rising costs and a shrinking workforce. As a result, while the economy looks strong on paper, many Americans are left feeling the strain of stagnant hiring and a shrinking middle ground. [Al Jazeera]
Market expert Andrew Pease from Russell Investments argues that the current dispute over Greenland is largely “political theater” with limited economic impact, as the markets only truly react when geopolitical events threaten energy prices or U.S. Treasury yields. While the Greenland situation has triggered headlines and tariff threats against European nations, it lacks the immediate global impact of the crisis in Iran.
Iran remains the primary risk for investors because it is a major oil producer and controls the Strait of Hormuz, a critical chokepoint for 20% of the world’s oil; any serious escalation there could drive Brent crude as high as $91 a barrel. Ultimately, while traders are keeping a “wait and see” attitude toward Greenland, they remain hyper-focused on Iran, as a disruption there whether through military conflict or internal labor strikes would cause a massive spike in global energy costs. [CNBC]
Oil price analysis
In January 2026, the global oil market is shifting toward a period of sustained lower prices, with Brent crude forecasted to average $55.87 per barrel, a 19% drop from 2025. This downward pressure is being driven by a significant global supply surplus as production in Brazil, Guyana, and Argentina surges, effectively cancelling out the war premium that briefly spiked prices during recent U.S.–Iran tensions.
While U.S. military movements in the Gulf remain active, the fear of immediate air strikes has subsided following diplomatic signaling from Washington and Tehran, leading investors to refocus on the reality of oversupplied inventories. Domestically, although crude production is expected to dip slightly as lower prices discourage new drilling in the Permian Basin, American consumers will likely see relief with gasoline prices averaging around $2.92 per gallon.
However, a new risk is emerging in the form of a potential trade war over Greenland, which could dampen European demand and further accelerate the price decline. With the energy landscape , investors are increasingly turning to Gold, which has hit record highs as a hedge against this volatile mix of weather crises, territorial disputes, and shifting trade policies. [U.S. Energy Information Administration (EIA)]
Global Oil Price Impact on Bangladesh
Bangladesh, heavily reliant on imported energy, faces significant economic challenges as global oil prices fluctuate and geopolitical tensions escalate, particularly amid the Iran-Israel conflict. In FY2023–24, Bangladesh imported 248 billion cubic feet of LNG (44.26 million barrels, costing $3.28 billion), 1.3 million tonnes of crude oil (9.58 million barrels, $709.7 million), 4.39 million tonnes of refined oil (32.16 million barrels, $2.48 billion), and 661,000 tonnes of furnace oil (4.84 million barrels, $373 million). Analysts estimate that a $10 rise in oil prices would add over $900 million to the energy import bill, while a $20 increase could push additional costs to $1.82 billion, creating a substantial fiscal and external shock for an economy already grappling with inflationary pressures and post-pandemic recovery challenges.
Rising fuel costs increase foreign exchange demand, weaken the taka, widen the current account deficit, and heighten inflation across transport, manufacturing, electricity, and food logistics. The government and energy boards face the politically sensitive decision of raising fuel prices or absorbing additional costs, which could further worsen the budget deficit and threaten Bangladesh’s balance of payments unless offset by higher exports or concessional financing.
Globally, Iran’s strategic control of the Strait of Hormuz, through which about one-fifth of the world’s oil passes, provides leverage to influence oil supply. Major importers, including China, India, and the EU, compete for limited supplies, driving prices higher. Regional instability, such as Houthi attacks in the Red Sea, has already increased global shipping costs by over 20%, while airspace closures across the Middle East complicate cargo and passenger flights, raising operational costs. Experts warn that prolonged conflict or disruptions in Hormuz could push crude prices to $90–$120 per barrel, sharply increasing Bangladesh’s import bill and placing immense strain on fiscal and monetary stability
The country’s energy security is critical because Bangladesh imports most of its fuel, with LNG supplies remaining uncertain despite relatively stable crude supply chains. Rising global oil prices act as a barometer for broader commodity price trends, feeding into domestic inflation and straining household budgets. The ready-made garment (RMG) sector, which contributes over 80% of export earnings, is particularly vulnerable, as higher shipping costs, rerouted maritime routes, and potential delays threaten competitiveness and reliability in international markets.
Additionally, Bangladesh’s growing export orientation means that stable trade routes and predictable energy prices are vital for maintaining economic growth. Any disruption to shipping or energy supply could erode production capacity, reduce export revenues, and indirectly affect domestic demand.
Many expatriates work in Gulf countries, and regional instability could force them to return home or lose jobs, reducing family incomes and weakening domestic consumption. Remittances also underpin foreign reserves, which have declined from $45 billion in 2021 to approximately $25 billion, sufficient to cover roughly four months of imports.
Any sustained increase in import costs or reduction in remittance flows could deplete reserves further, forcing the Bangladesh Bank to allow the taka to depreciate. While a weaker taka may enhance export competitiveness, it would simultaneously raise import costs and foreign currency obligations, straining the current account and budget capacity.
The impact of higher energy costs extends beyond trade and remittances. Elevated oil prices feed directly into production and transportation costs, triggering cost-push inflation across manufacturing, agriculture, and logistics. Fuel powers mechanized farming, irrigation, and transport, meaning higher fuel prices raise the cost of food production and distribution, which can lead to higher consumer prices. Industrial and commercial sectors also face rising operational costs, affecting profitability and investment capacity.
High inflation and a weaker currency may increase defaults within the financial sector, straining bank balance sheets, while investor caution could exacerbate stock market volatility. Policy interventions such as fuel hedging, strengthening reserves, creating a remittance stabilization fund, subsidizing shipping costs, and providing targeted sectoral aid are considered crucial to mitigating these risks.
Domestically, the Bangladesh Petroleum Corporation (BPC) plays a central role in energy management. Fuel prices are adjusted monthly based on global market averages from S&P Global Platts and Arabian price indicators, with BPC earning up to 40 cents per litre. Despite global oil price fluctuations, domestic prices have not decreased proportionally due to currency depreciation, which has seen the dollar rise from Tk86 in early 2022 to Tk122.
In FY2024–25, BPC posted profits of Tk 43.16 billion, 353.61 million USD up from Tk 39.43 billion, 323.28 million USD. in FY2023–24, while the government earned around Tk 150 billion, 1.23 billion USD. annually from duties and taxes on fuel oil Diesel constitutes 75% of domestic fuel consumption, primarily imported, with 62% used in transportation and 15% in agriculture. Analysts argue that domestic fuel prices could have been reduced by Tk 10–15 per litre without significantly affecting revenue, which would have eased transport and production costs and provided relief to households.
Criticism has been directed at prior administrations, particularly the Awami League government, for mismanagement of energy resources. Allegations include inefficiency, corruption, and prioritizing fuel-related revenue generation over energy security. Over the past decade, BPC has earned over Tk 500 billion, 4.10 billion USD. in profit despite occasional losses, with revenues often justified as reinvestment in projects like the planned domestic refinery to increase refining capacity, a project ongoing since 2012. Experts argue that fuel pricing policies have prioritized administrative convenience over market alignment and that international audits of BPC are long overdue
Fuel price adjustments have direct implications for agricultural cycles. The December 2025 increase of Tk2 per litre ahead of the boro planting season raised diesel to Tk104, kerosene to Tk116, petrol to Tk120, and octane to Tk124, adding to farmers’ production costs. While global oil prices, including Brent and WTI crude, have declined in early 2025, domestic prices remain relatively high due to the combined effects of currency depreciation and adherence to IMF-recommended market-based pricing mechanisms. These measures aim to reduce fiscal burden from subsidies and align domestic prices with global trends, yet they also reinforce the challenge of balancing energy affordability with fiscal sustainability. [The Business Standard],[The Financial Express],[The Daily Star],[The Business Standard], [Prothom Alo],[bdnews24]
Here’s a clear table summarizing Bangladesh’s energy imports, costs, and the impact of oil price increases:
| Energy Type | Volume Imported | Equivalent Barrels | Cost at $74/barrel | Additional Cost if +$10/barrel | Additional Cost if +$20/barrel |
| LNG | 248bc | 44.26 million | 3.28 million | 442.7 million | 885.3 million |
| Crude Oil | 1.3 million tonnes | 9.58 million | 709.7 million | 95.9 million | 191.7 million |
| Refined Oil | 4.39 million tonnes | 32.16 million | 2.48 billion | 321.6 million | 643.3 million |
| Furnace Oil | 661,000 tonnes | 4.84 million | 373 million | 48.4 million | 96.9 million |
| Total | N/A | 90.84 million | 6.84 billion | 908.6 million | 1.82 billion |
KEY TAKEAWAYS
- Brent crude fell over 4% to $63.76/barrel as U.S.–Iran tensions eased. Investors quickly sold off the “war premium” after diplomatic signals reduced fears of immediate conflict.
- Iran controls this chokepoint, which handles 20–30% of global oil. Even the threat of closure drives up insurance costs and market volatility, though immediate military threats have subsided.
- Surplus inventories in the U.S., Venezuela’s return to exports, and rising production in Brazil, Guyana, and Argentina have pushed Brent crude toward an average of $55.87/barrel in 2026, down 19% from 2025.
- Potential tariffs on Europe and extreme Arctic cold pushing natural gas demand are adding uncertainty. Investors are turning to gold ($4,700/oz) as a hedge against volatility.
- Bangladesh relies heavily on imported energy. FY2023–24 imports: LNG 44.26M barrels ($3.28B), crude 9.58M barrels ($709.7M), refined oil 32.16M barrels ($2.48B), furnace oil 4.84M barrels ($373M). A $10 rise in prices could cost $908.6M; $20 could add $1.82B.
- Higher fuel costs weaken the taka, increase inflation, and widen the current account deficit, affecting transport, manufacturing, electricity, and food logistics.
- RMG exports (80% of earnings) face rising shipping costs. Agriculture sees higher diesel prices, e.g., December 2025 increases (diesel Tk104, petrol Tk120) raised production costs for boro planting.
- Remittances (~$27B) support households and reserves, which have fallen from $45B to $25B. Regional instability could reduce inflows, worsening fiscal and foreign exchange pressures.
- BPC earned Tk43.16B (~$353.6M) in FY2024–25; the government collected Tk150B (~$1.23B) from fuel duties. Analysts say prices could have been reduced by Tk10–15/litre without major revenue loss.
- Fuel hedging, reserve strengthening, remittance stabilization, shipping subsidies, transparent pricing, and preparedness for supply disruptions are essential to manage inflation, protect exports, and stabilize the economy.
Verification Note: Information is collected and cross-verified through multiple channels, including official information desks, credible social media sources, and established news outlets. Each source is assessed for reliability, with unsubstantiated or irrelevant claims excluded. The validated information is then systematically analyzed to derive conclusions.
Monjuba T Bhuiyan is a Finance student at North South University (NSU), currently working as a Strategic & Security Reporting Fellow at the Bangladesh Defence Journal, where she focuses on writing about the intersection of economics, security, and geopolitics. Her analysis emphasizes structure over noise, context over headlines, and strategy over spectacle.