Full Breakdown
Economic Fallout of the US-Israel-Iran War on Egypt
4/7/2026, 7:48:45 AM
Resumption of Israeli Gas Supplies
Israel's natural gas flows to Egypt have returned to pre-war levels, reaching approximately 1.1 billion cubic feet per day following the resumption of production at its Leviathan and Tamar gas fields. This restoration comes after a temporary shutdown due to disruptions caused by the ongoing US-Israel war against Iran, which had previously led to a reduction in gas supplies that constituted 15-20% of Egypt's overall energy consumption.
Economic Impact on Egypt
The war has significantly strained Egypt's economy, exacerbating existing challenges. The Egyptian pound has depreciated sharply, losing around 13.7% of its value since the conflict began, with the exchange rate surpassing EGP 54 to the dollar. This depreciation has been accompanied by capital outflows exceeding $5 billion, further tightening foreign currency liquidity. The economic turmoil has also led to rising commodity prices, with inflation remaining in double digits.
Egypt's non-oil private sector has shown signs of deterioration, with the S&P Global Egypt Purchasing Managers' Index falling to 48.0 in March, indicating contraction. Businesses have cited the conflict as a primary factor dampening client demand and increasing operational costs.
Energy and Commodity Supply Challenges
The war has disrupted essential supplies, particularly energy and grain. Egypt has sought to mitigate these challenges by expediting liquefied natural gas (LNG) shipments and receiving grain supplies from Russia. Russian President Vladimir Putin recently assured Egyptian Foreign Minister Badr Abdelatty of continued grain support, crucial for a nation that heavily relies on imports to meet its food needs.
The conflict has also prompted Egypt to raise electricity prices for higher-use consumers, reflecting the severe global energy crisis linked to the war. The government has implemented measures to curb energy consumption, including earlier closing hours for commercial venues.
Criticism and Opposition
Critics have raised concerns about the government's handling of the economic fallout. Trade expert Hesham al-Dugwi warned that prolonged conflict could exacerbate food insecurity, as Egypt relies on international markets for wheat, with local production only meeting about 50% of consumption needs. Additionally, the rising costs of energy and commodities have put pressure on the state treasury, complicating efforts to stabilize the economy.
Official Statements and Responses
Egyptian President Abdel-Fattah El-Sisi has called for international efforts to end the conflict, emphasizing the need to mitigate its negative repercussions on energy markets and supply chains. He reiterated Egypt's condemnation of Iranian attacks on Arab states and expressed the importance of regional stability.
What's Next
As the conflict continues, Egypt is likely to face ongoing economic challenges, including potential further depreciation of the pound and rising inflation. The government is exploring alternative financial arrangements, such as expanding currency swap agreements with China, to alleviate pressure on its economy. The situation remains fluid, with the potential for significant implications for Egypt's energy security and economic stability.
