Egypt pays a heavy price for war in Iran

Egypt, a nation that receives tens of billions in oil and gas deals with the Persian Gulf states, is paying a heavy price from the war and for its posture toward Iran.

Egypt pays a heavy price for war in Iran

Egypt, a nation that receives tens of billions of dollars in oil and gas deals with Persian Gulf states, is paying a heavy price from the war and for its posture toward Iran.

Egypt has suffered a series of financial blows from the war, including a spike in inflation and energy prices, all while national revenue from the Suez Canal has plummeted.

The North African nation can ill afford strained relations with the Arab states given the significant funding that comes from that region.

After Iran’s attacks on U.S. military bases in Gulf states, Cairo seemed “wary of being drawn into the conflict,” Mahmoud Hassan wrote in a recent opinion for Middle East Monitor.

Tension between Egpyt and the Gulf states escalated, he wrote, after an ambassador to Tehran, was quoted in the media defending Iran’s right to strike U.S. bases in the Gulf.

Egypt has been among the countries involved in mediation talks but has not committed the Egyptian military in the war, Hassan explained. “Cairo is maintaining a position of strategic balance… as it understands that the defeat of Iran would mark the beginning of an Israeli-led era in the region,” Hassan wrote.

The Iranian ambassador in Cairo has publicly thanked Egypt’s government and people for their support amid the U.S.-Israeli attacks on Iran: “We and the Egyptian people stand in the same trench, and it is essential to defend ourselves against the entity,” referring to Israel.

Counselor Ahmed Refaat told Atlas Broadcasting that the primary reason for Egypt’s stance stems from the Sisi regime’s insistence on not paying any political price without receiving a corresponding economic return.

Gulf states previously backed the 2013 coup against Egyptian President Mohamed Morsi and the suppression of the Muslim Brotherhood. Since July 2013, Gulf countries have backed Egyptian President Abdel Fattah El-Sisi’s military regime with financial support totaling $62 billion.

Half of that funding comes from oil and gas allocations, while major development grants and bank deposits exceed $16 billion. These agreements between Gulf states and the Egyptian military, the country’s primary contractor, as well as private Gulf firms, are expected to surpass $40 billion by 2030.

Meanwhile, Egypt also relies partially on gas imported from Israel’s Tamar field to meet its domestic needs and export the surplus; however, with every military escalation, these platforms are shut down for security reasons, creating an immediate deficit in Egypt’s national electricity grid.

Petroleum expert Medhat Youssef pointed to a daily gas deficit of around 2 to 2.2 billion cubic feet and warned that the situation could worsen during the summer as consumption rises.

The war has sharply increased energy costs and driven global gas prices higher, more than doubling Egypt’s import bill (from $560 million to $1.65 billion per month). 

He emphasized that higher fuel costs put pressure on electricity production, forcing the state either to reduce consumption or resort to temporary power cuts—leading to a crisis affecting both production and consumption alike.

When Mediterranean gas supplies are disrupted, the government is forced to purchase liquefied natural gas (LNG) cargoes at global market prices, which increases pressure on foreign currency reserves already declining in Egypt due to inflation, slowing economic growth, and rising population growth.

The economic repercussions of the Iran war do not stop at power generation; they strike the pillars of national income. Revenues from the Suez Canal have declined due to direct Iranian threats or via proxy forces of the Revolutionary Guard in the Red Sea such as (the Houthis), prompting major shipping companies to prefer the “Cape of Good Hope” route. The result? A sharp drop in Suez Canal revenues, which are a primary source of foreign currency.

Secondly, tensions in the Strait of Hormuz, at the northern point of the Red Sea, and Bab El-Mandeb to the south, raise maritime insurance costs, which automatically leads to higher prices for imported goods. This, in turn, pushes inflation in Egypt to record levels, eroding citizens’ purchasing power as they continue to suffer from persistent electricity outages.

Factories that rely on gas and electricity may be forced to reduce operating hours, affecting domestic production and exports. The simultaneous rise in energy prices and repeated power cuts come as summer approaches, when electricity use spikes for cooling.

This article was translated from Arabic to English