Since the outbreak of the direct confrontation between the Israeli occupation state and Iran, the map of the Middle East has entered a phase of acute tension, in which geography intersects with geopolitics in an extremely complex regional scene. While the parties exchange missile and drone strikes across the skies of Syria, Iraq and Yemen, Egypt is following the scene from a critical position, in which it is trying to balance caution and engagement, amid rapid military and political shifts.
The latest escalation, which came after an exchange of military operations between Tel Aviv and Tehran, is no longer merely an extension of distant conflicts; it has turned into an open regional clash that places a number of regimes before delicate tests of their security and interests. Given Egypt’s geopolitical standing, it does not appear able to settle for the role of a neutral observer, as its vital interests, from gas and electricity supplies, through navigation in the Suez Canal, to the tourism sector and regional diplomacy, intersect directly or indirectly with the parties to the conflict.
According to observers who spoke to Zawia3, Cairo does not have the luxury of ignoring it; every military escalation in the Middle East may be reflected domestically in the form of economic disruptions, such as gas interruptions, fluctuations in the financial market, or a decline in tourism revenues, in addition to further pressure on foreign currency reserves. With a domestic situation already suffering from acute financial pressures, regional tensions appear like miniature earthquakes threatening what remains of economic stability. At the same time, Egypt emerges as a regional player seeking, through diplomatic means, to calm the escalation or limit its repercussions on its interests.
The Suez Canal in a Danger Zone
With the escalating tension between Iran and the Israeli occupation state, the arena of confrontation is no longer confined to land and air; it has extended to vital maritime corridors, foremost among them the Red Sea, which forms one of the pillars of the Egyptian economy through the Suez Canal. For Cairo, any disruption to international navigation in this area is not merely an economic threat, but a strategic danger that may carry security and sovereign dimensions of the utmost gravity. With the growing use of missiles and naval drones, the scenario of disrupting or closing some routes in the Red Sea has become a possibility, which could immediately affect the movement of ships transiting towards the canal.
In this context, Mohamed Hamed, director of the East Mediterranean Forum for Political and Strategic Studies, believes that the current military escalation directly affects the security and stability of the Red Sea and the Suez Canal, especially in light of Iranian threats to close the Strait of Hormuz and Bab el-Mandeb, which places the Egyptian economy in the face of multiple dangers, at a moment when military activity is increasing in that area, which is vital to international navigation.
Hamed points out, speaking to Zawia3, that this escalation reveals that “Israeli expansion in the region has reached its peak”, especially given Israel’s success in penetrating deep into Iran and targeting sensitive facilities, which reflects, in his view, an intelligence and technological superiority that entrenches its influence across wide areas of the region, and places many countries, including Egypt, before new and turbulent regional equations.
He adds: “Egypt, for its part, rejects any Israeli hegemony over the region, especially if the Iranian regime collapses. At the same time, Israel is suffering from domestic instability, as a result of being drained since October 2023 on more than one front, the latest being the Iranian front. This situation is pushing the Israeli government to take confused decisions that lack a long-term strategic vision.”
He continues that this turmoil may open a wider margin for Cairo to leverage its regional position, whether in files such as the Grand Ethiopian Renaissance Dam crisis, the security arrangements in the Gaza Strip, or the future of the situation in the Red Sea and the Eastern Mediterranean.
The forum’s director stresses that the overall impact of this conflict on Egypt is negative at the political, economic and diplomatic levels, and that Egyptian-Israeli relations will continue to go through recurrent tensions, as the rearrangement of regional influence continues and the scope of confrontation expands.
Historically, Suez Canal revenues have formed one of Egypt’s main sources of hard currency, as they provided more than $9.4 billion in 2023. Any decline in these revenues because of disrupted navigation aggravates the crisis of the trade balance and foreign currency reserves. The disruption of shipping traffic also weakens the canal’s competitiveness in favour of alternative routes, even if they are more costly or take longer.
The Egyptian Economy Under Pressure
The war’s impact was not slow to reach the Egyptian economy, which already stands on fragile ground amid a crisis of inflation, rising external debt, and challenges related to the exchange rate and investment. Perhaps the most prominent direct reflection was the reaction of the Egyptian financial market, as the Egyptian Exchange recorded one of its biggest losses in years in the first sessions after the escalation; within hours, the EGX30 index fell by more than 7%, and the market lost about EGP 30 billion of its market capitalisation, amid a rapid exit of foreign and local investors and general concern about the region entering a scenario of prolonged confrontation. As is customary in periods of tension, many investors turned to “safe havens” such as gold and the dollar, which increased the pressure on the Egyptian pound, which already suffers from successive waves of decline.
Salah Labib, a researcher in international affairs, stresses in an interview with Zawia3 that the Iranian-Israeli conflict in its current form has not yet developed into an all-out war, which means that the direct effects on Egypt are still within the framework of economic pressures and some security and political repercussions; but if the conflict escalates into an open, all-out war, the repercussions will be “far more dangerous than those left by the American invasion of Iraq in 2003”, as he described it.
Labib believes that although Iran has had a long dispute with Cairo since the Islamic Revolution, its mere existence represented a threat factor for the Israeli entity; and although a peace agreement was signed between Cairo and Tel Aviv and the two have not entered a war for more than four decades, the existence of “strategic threats from it”, given that it is an expansionist state, places the burden of confronting its dangers on Egyptian national security. However, he warns that “if Israel manages to get rid of all its adversaries in the region, it will turn into a more aggressive power towards the states it considers competitors or threats to its influence, including Egypt”.
Regarding the relationship with the United States, Labib points out that Egypt is “a traditional and steadfast ally of Washington”, a strategic alliance in which both sides have invested politically, militarily and economically for decades. Therefore, he does not expect the weakening of Iran to have a direct negative effect on Egyptian-American relations, but he warns of indirect repercussions that could arise if Israel continues to strengthen its regional position without restraint, especially in the event of a future dispute between it and Egypt.
He adds: “Israel, as a colonial state, has an expansionist colonial project based on imposing a fait accompli by force, and it has previously used this approach in several files, most notably the forced displacement of Palestinians, which may place Egypt, like Jordan, in a direct confrontation with an Israeli government that seeks to achieve its goals by force, backed by nuclear military superiority and close relations with the United States”, stressing that Egypt has the ability to set limits to Israel’s expansionist dreams.
Labib warns of a more dangerous scenario if Iran feels that it is facing a serious attempt to topple the regime, as desperation may push it to widen the scope of its responses, by striking American bases in the region or targeting international shipping lanes, which would have serious repercussions on the Suez Canal and the Egyptian economy. Nevertheless, the Egyptian researcher sets out a possible scenario for easing tension, consisting of a settlement between Iran and the United States, under which Tehran gives up its nuclear ambitions in exchange for the regime’s survival, similar to what happened with Libya under Gaddafi. If this scenario materialises, the researcher believes that the direct threats to Egyptian economic projects will recede to a large extent.
Energy Security… Gas in the Line of Fire
From the first moment of the escalation of the confrontations between Iran and Israel, the situation was quickly reflected in a vital file for Egypt, namely natural gas. With the halt of Israeli gas supplies as a result of Tel Aviv’s closure of the “Karish” and “Leviathan” fields in the Eastern Mediterranean as a precautionary measure, Cairo found itself facing a renewed energy crisis that threatens domestic balance and brings back the crisis of power cuts, as the heat intensifies in summer. Estimates indicate that up to 800 million cubic feet per day of the gas that Egypt was importing from Israel has gone out of the equation, equivalent to about 13% of the needs of the local market. This acute shortage created a gap that the Ministry of Electricity was forced to cover by returning to the use of fossil fuels such as mazut and diesel, which increases costs, affects the environment and weakens the efficiency of power plants.
The crisis went beyond the supply of electricity to heavy industries, especially energy-intensive sectors such as steel, cement and fertilisers, which began to suffer from weak supplies and rising costs, which in turn is reflected in prices in the local market. In the same context, Egyptian exports of liquefied natural gas were harmed, especially with the decline in the quantities allocated for liquefaction and re-export from the Idku plant, depriving Egypt of a vital source of hard currency amid an ongoing financing crisis.
In the same context, global oil prices rose amid growing concern about the security of supplies in the Gulf and Red Sea region, which was reflected in Egypt’s import bill; every one-dollar rise in the price of a barrel of oil translates into millions of dollars of additional spending on energy and commodity subsidies, threatening the targets of the state budget, which the state has been seeking to rein in for years.
The Diplomatic Dimension… Between Neutrality and Intervention
As the flames of war between Tehran and Tel Aviv escalate, Egyptian diplomacy stands on a fine thread between its commitment to its historical positions and its pursuit of preserving its strategic interests in a region seething with conflicts. Although no explicit official Egyptian position condemning a specific party has been issued, Cairo is adopting what could be called “active neutrality”, seeking to absorb the repercussions of the escalation without directly engaging in taking sides or political confrontation.
Historically, Egypt has been bound to Israel by strong security and economic relations since the signing of the peace agreement in 1979, relations that have been strengthened in recent years, particularly in the fields of gas and security coordination in Sinai and Gaza. On the other hand, the signs of cautious openness between Cairo and Tehran cannot be ignored, embodied in repeated diplomatic meetings and attempts to build channels of dialogue, especially since President Ebrahim Raisi took power.
In this context, Egypt is seeking to play the role of mediator, albeit quietly, between the parties to the conflict, benefiting from its balanced position and its intertwined relations in the region. Some diplomatic sources indicate that contacts have already taken place between Cairo and each of Washington, Tel Aviv and Tehran, in an attempt to de-escalate and to prevent the confrontation from spreading to other Arab arenas.
Sarah Kira, director of the European North African Centre for Research, says in an interview with Zawia3 that Egypt is continuing its intensive diplomatic efforts to contain the escalation and protect its economic and security interests, with a special focus on ensuring the safety of navigation in the Suez Canal and the stability of the Middle East region. The success of these efforts depends on how the situation develops on the battlefields and on Cairo’s ability to play the role of an effective mediator, while avoiding being drawn into any direct military confrontation.
Kira agrees with Hamed and Labib about the pressures that Egypt faces as a result of the war, and says in her interview with us: “With the outbreak of the Iranian-Israeli war, Egypt faces enormous economic challenges; the fiscal deficit is worsening due to escalating tensions that threaten maritime security in the Red Sea and the Suez Canal. The waterway’s revenues have seen a marked decline as a result of the slowdown in shipping traffic and repeated delays, which increases the pressure on the state budget and threatens the sustainability of vital state revenues.”
She adds: “On the geopolitical level, this war imposes new alliance equations on Cairo, as it must balance its interests between the regional and international powers involved in the conflict. Nevertheless, Egypt is still known in international diplomacy as the protective fortress of the region, with its long experience and successive successes in safeguarding its borders and preserving its interests without engaging in direct conflicts.
Kira continues: “Also, and no less important, Egypt will be harmed by the rise in global energy prices as a natural result of the halt or reduction of supplies, which is reflected in the cost of local production and increases the burdens on consumers. This tense climate may also contribute to a decline in foreign direct investment and slow the take-off of the tourism sector and the services linked to it, which are among the main tributaries of the national economy.”
In the first official response to the strikes exchanged between Iran and Israel, the Egyptian Ministry of Foreign Affairs expressed its grave concern over the development of the military situation in the region, warning that continued escalation “portends dire consequences” for regional and international security. Egypt condemned “the recent Israeli military attacks”, describing them as “an extremely dangerous escalation that threatens to widen the scope of armed conflict in the Middle East”. Foreign Minister Badr Abdelatty affirmed that Cairo is following developments closely and calls on all parties to “exercise restraint and halt military operations immediately”, stressing that Cairo seeks to prevent the region from sliding into an all-out confrontation that could destabilise it for years.
Concurrently with the escalation, Egypt led intensive diplomatic efforts at the Arab and Islamic level, and these moves resulted in a joint statement issued by 21 Arab and Islamic countries, in which they condemned the military attacks and demanded an immediate cessation of hostilities. The joint statement stressed the need to respect international law and the Charter of the United Nations, and rejected the use of force to settle political scores in the region. Abdelatty also held phone calls with the foreign ministers of Russia, Italy and Spain, to stress the gravity of the situation and the need to activate the role of the international community in preventing the collapse of regional stability.
At the domestic level, informed sources revealed that the Egyptian government formed a security and economic crisis cell to follow the repercussions of the potential war, which is working to assess scenarios for the development of the conflict should operations expand or additional regional powers become involved.
Although the war under way between Tehran and Tel Aviv is not being fought on Egyptian territory, Egypt is not safe from its shrapnel, whether at the level of the economy, energy or security. What is happening between two regional powers the size of Iran and Israel is a geostrategic earthquake shaking the balances of the entire region, in which Cairo finds itself facing a complex test that requires it to hold the stick from the middle and to skilfully manage the contradiction between alliances, interests and threats.
Gas, which has become a pressure card in the war, threatens energy stability at home and exposes the fragility of relying on a single partner in times of crisis. Navigation in the Red Sea, which represents a lifeline through the Suez Canal, has become an open arena for the possibilities of escalation, which could cost Egypt billions of dollars. As for the economy, it is at the mercy of the winds of anxiety, with indicators fluctuating between the fall of the stock exchange and the rise of the dollar, while the ordinary citizen feels that his burdens double with every external crisis.
Editorial correction: The first version of the report stated that Israel closed the “Tamar” and “Leviathan” fields; the correct information is that it closed the “Leviathan” and “Karish” fields on 13 June 2025, while the “Tamar” field continued production, according to what was published by the specialised energy platform “World Oil” on 25 June 2025.
