Iran war: Egypt's difficult balancing act
The US-Iran war has already had a negative economic impact on Egypt. Now new threats from the Houthi group in Yemen are likely to worsen
The US-Iran war has already had a negative economic impact on Egypt. Now new threats from the Houthi group in Yemen are likely to worsen that. At the same time, Egypt is trying to stay on good terms with all parties. The Suez Canal boasts an array of impressive statistics. At 193 kilometers (120 miles) long, the Egyptian waterway is located between the Mediterranean and the Red Sea and it saves ships traveling between Europe and Asia approximately 10,700 kilometers. This is why, since it was opened in 1869, the canal has become one of the world's most important trade routes. However unrest in the Middle East has seen shipping companies increasingly avoid the Suez Canal over the past couple of years. The Houthi rebel group in Yemen has targeted shipping in the Bab el-Mandeb Strait, off the coast of Yemen. To get to the Suez Canal, ships must pass the Bab el-Mandeb and the Yemeni coast. Recently the Houthis have again threatened to block ships passing the Bab el-Mandeb Strait, and there are fears that the trend to avoid the Suez Canal will accelerate. This is a huge problem for Egypt. Fees paid by shipping companies transiting the Suez Canal are an important source of revenue for the country. According to Egyptian President Abdel-Fattah el-Sissi, Egypt likely lost around $7 billion (€6.15 billion) from a decrease in traffic through the Suez Canal in 2024 alone. The Reuters news agency said that at times, losses could have been as much as $8 million (€7 million) in a month.
Houthis claim attacks on Saudi tankers in Red Sea To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video This is why the economic consequence of that loss extends well beyond shipping. Egypt has not been impacted by the Iran conflict in a major military way, but it is certainly seeing an economic effect. Egypt loses billions on Suez Canal "Economically, Egypt is in a very ambivalent situation," says Stefan Lukas, director of German think tank Middle East Minds. During 2025 and 2026, revenues from canal transits actually went up again, mainly because oil from the Gulf states was transported via Saudi pipelines to the Red Sea and then onwards through the Suez Canal. This was to avoid the Strait of Hormuz, which is being blocked by Iran and the US in turns. But the new threats by the Houthis to block the Bab el-Mandeb Strait could interfere with this alternative route. It's bad timing for Egypt: Rising energy prices and the International Monetary Fund's reforms are already putting tough limits on Cairo's financial flexibility. "Higher energy prices have made imports more expensive and driven up inflation," says Hanna Voss, an expert on the region with Germany's Friedrich Ebert Foundation. "The uncertainty in the Red Sea and potential disruptions to the passage through Bab el-Mandeb are jeopardizing Suez Canal revenues." The Yemeni Houthi rebels recently threatened again to attack ships going past the coast of Yemen Image: Mohammed Hamoud/Anadolu/picture alliance Tourism into Egypt, capital inflows and the exchange rate for the Egyptian pound are sensitive to any changes.
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