Escalating tensions involving Iran, the Houthis, and the United States are intensifying pressure on Egypt’s economy by threatening shipping through the Bab el-Mandeb Strait, a key gateway to the Suez Canal. While canal revenues dropped sharply from about $10.25 billion in 2023 to roughly $4 billion in 2024, they have since rebounded. However, Cairo faces renewed risks as the fallout from the US-Iran conflict has prompted shipping companies to consider alternative routes. With inflation, IMF-backed reforms, and high debt already straining public finances, Egypt is carefully balancing relations with Washington, Gulf allies, and Tehran while quietly supporting diplomatic efforts to reduce regional tensions. A de-escalation would benefit the country as it would encourage ships to resume transiting the Suez Canal. Meanwhile, prolonged conflict favors neither regional economies nor global trade. Over the longer term, sustained instability could weaken Egypt’s foreign currency earnings, deepen fiscal pressures, and reinforce its dependence on external financial support.
DW