Egypt in a Time of Crisis
Decades of repression and demands for fundamental political change, combined with the sharp collapse of Iran’s currency, drove people into the streets, and mass protests first began on 28 December 2025. In this climate, tensions in the Middle East escalated further when the United States and Israel launched strikes on Iranian military on 28 February 2026. These two actors remain major drivers of conflict in the Middle East. Since the first day of the war, at least 1,937 people have been killed in the U.S.-Israeli attacks, including 212 children. This war not only has humanitarian and economic consequences across the region but also places Egypt in a complex position.
The war has had a detrimental impact on the international economy, including the Gulf countries. It has led to increased energy costs and strained public finances, resulting in broader economic disruption. Consequently, the Egyptian government adopted certain measures to mitigate these effects. For at least the next two months, Egypt will slow down large state projects with high fuel and diesel usage. In addition, fuel allotments for government vehicles will be reduced by 30 percent. These policies indicate Egypt’s economic vulnerability and its prioritization of domestic stability in the context of external challenges. In this context, economic pressures shape Egypt’s foreign policy, pushing it toward caution rather than confrontation.
According to the U.S. Integrated Country Strategy (ICS) for Egypt, the country’s role as a regional player and its stance on diplomatic resolutions to conflicts in the Middle East are of strategic importance. However, the ICS for Egypt demonstrates some risks in the country’s policies in its near abroad. Without a strong alliance, third parties including China and Russia could try to redirect Egyptian foreign policy in ways that do not serve U.S. interests. In economic terms, the country is the third largest destination for foreign direct investment. Moreover, Egypt is the leading African market for U.S. exports. In 2025, bialateral trade reached $11.2 billion. The country introduced reforms to reduce the role of state-owned enterprises in the economy, and intends to open its market to private investment. However, the ICS for Egypt demonstrates some risks in the failure of the reforms. Worsening economic conditions in Egypt could reduce bilateral trade and threaten American employment connected to exports. Egypt must navigate regional tensions carefully to maintain stability and growth, considering this economic interdependence.
James Harmon, chairman of the US Egypt Enterprise Fund and former chairman of the US Export-Import Bank stated that “Just a week before the current conflict in the Gulf, the IMF expressed confidence in the progress being made in Egypt’s economy. Egyptian policymakers are implementing the right reforms and executing them effectively. That said, current events, largely outside Egypt’s control, are creating unexpected economic pressures that warrant careful monitoring. Given Egypt’s significance to the region and to the United States, it is important to support Egypt now.” (Azim, 2026). This statement reveals that Egypt’s economic stability constitutes both a domestic concern and an issue of international interest, especially for the U.S.
Egypt as a Mediator
Pakistan, Saudi Arabia, Turkey and Egypt, as key regional powers, gathered to discuss regional de-escalation. The talks were held under the leadership of the Pakistan government in Islamabad. Although Pakistan has taken a leading role in discussions on how to end the war, Egypt continues to play a significant role as a mediator. Egypt’s Foreign Affairs Minister, Badr Abdelatty, engaged in diplomatic telephone calls, holding consultations with U.S. and Iranian officials, as well as foreign ministers of affected Middle Eastern countries. Abdelatty stated that Cairo was ready to host any meetings related to Iran as long as they serve de-escalation, and emphasized Egypt’s support for Trump’s initiative to negotiate with Iran. During his call with U.S. Middle East envoy Steve Witkoff, Abdelatty said “Egypt’s support for diplomatic efforts aimed at resolving outstanding issues through negotiations” highlighting Egypt’s priority for a political rather than a military solution. This approach indicates Egypt’s broader strategy of maintaining regional influence while avoiding direct involvement in conflict.
Since the signing of the 1979 Peace Treaty, Egypt and Israel relations have evolved into a strategic relationship, and shaped by security and political interests. Natural gas agreements between Egypt and Israel strengthen the strategic partnership. Moreover, they developed extensive security cooperation in Sinai against insurgents. In addition to this cooperation, Egypt also played a key regional diplomatic role, as Cairo have been one of the main mediators aligning with the U.S. to secure ceasfire between Israel and Hamas in Gaza.
Considering its economic dependence on the U.S., strategic alliances, and diplomatic role as a mediator, Egypt continues to pursue a cautious balancing strategy in the Middle East. Its policies reflect an effort to safeguard domestic stability, promote regional peace, and maintain economic growth. By leveraging its relation with both the U.S. and Israel, and by actively engaging in regional diplomacy, Egypt seeks to remain a stabilizing force amid ongoing tensions and uncertainty.
REFERENCES
Al Jazeera. (2026, March 25). Egypt says it is ready to host Iran de-escalation talks. https://www.aljazeera.com/video/newsfeed/2026/3/25/egypt-says-it-is-ready-to-host-iran-de-escalation-talks
Al Jazeera. (2026, March 29). Pakistan maintains ‘delicate balancing act’ as it hosts Iran talks. https://www.aljazeera.com/news/2026/3/29/pakistan-maintains-delicate-balancing-act-as-it-hosts-iran-talks
Anadolu Ajansı. (2026, February 27). Egypt’s foreign minister urges continuation of Iran talks in call with US envoy Witkoff. https://www.aa.com.tr/en/americas/egypt-s-foreign-minister-urges-continuation-of-iran-talks-in-call-with-us-envoy-witkoff/3842264
Azim, K. (2026, March 17). A crisis in Egypt could be a warning sign for the global economy. Atlantic Council. https://www.atlanticcouncil.org/blogs/menasource/a-crisis-in-egypt-could-be-a-warning-sign-for-the-global-economy/#:~:text=A%20financial%20disruption%20in%20Egypt,financial%20crises%20rarely%20remain%20contained.
EuroNews. (2026, March 29). Iran wary of diplomacy with the US amid reports of planned ground offensive. https://www.euronews.com/2026/03/29/pakistan-to-convene-with-saudi-egypt-and-turkey-in-hopes-of-de-escalating-regional-hostili
Mandour, M. (2025). Egypt as Israel’s New Ally. In: van Veen, E. (eds) The Future of the Occupation of the Palestinian Territories after Gaza. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-93798-9_8
U.S. Department of State. (2022). Egypt. https://2021-2025.state.gov/wp-content/uploads/2021/02/ICS_NEA_Egypt_Public-Release.pdf
The New Arab. (2026, March 28). Egypt to slow some state projects amid Iran war. https://www.newarab.com/news/egypt-slow-some-state-projects-amid-iran-war
