The renewed US-Iran conflict in the Middle East is expected to further curb Egypt’s economic growth prospects as global oil prices are forecast to rise again, while several sectors of the economy continue to grapple with the effects of months of conflict, analysts say.
In its latest World Economic Outlook report released days ago, the International Monetary Fund (IMF) lowered its forecast for Egypt’s economic growth in fiscal year 2026-27 to 4.4 percent, down from the 4.8 percent projected in April. The IMF cited “the continuing impact of the Iran conflict — particularly the closure of the Strait of Hormuz — on the Middle East, weaker investment, higher financing costs, and persistent uncertainty.”
Economist Wael El-Nahas said the downgrade is “not limited to Egypt but reflects the global economy as a whole in light of the conflict’s repercussions,” describing the revision as both natural and expected.
Speaking to Asharq Al-Awsat, El-Nahas noted that the current period of skirmishes between the two sides could be viewed as a period of tacit understandings, allowing oil supplies to keep flowing while limiting sharp increases in food prices and other commodities. However, he warned that a renewed conflict would bring “a much worse period.”
Financial markets researcher Mohamed Mahdy Abdulnabi told Asharq Al-Awsat that geopolitical tensions are the main driver behind the weaker growth outlook.
He said Egypt faces several challenges under the current circumstances, including higher borrowing costs, greater reluctance among lenders to extend new financing, declining foreign investment, stagnation in the private sector, and continued losses at the Suez Canal.
President Abdel Fattah al-Sisi has previously estimated the canal’s losses at $10 billion, citing regional tensions and their impact on Red Sea shipping.
Abdulnabi warned that if the conflict persists, pressure on Egypt’s economy will intensify. “When global oil prices fell below $70 a barrel, the Egyptian government did not cut domestic fuel prices. But as soon as prices began rising again, discussion resumed over the automatic fuel pricing mechanism and the need to increase fuel prices,” he remarked.
The government raised fuel prices by between 14 and 30 percent last March, just 10 days after the US-Iran conflict erupted, amid rising energy import costs.
El-Nahas warned that global oil prices could climb above $100 a barrel, noting that Egypt’s current state budget is based on an assumed oil price of about $75 a barrel. Any increase, he said, would raise the country’s energy import bill and widen the budget deficit. He also cautioned that it could trigger another round of fuel price hikes, further worsening the cost-of-living crisis.
Egypt’s annual inflation rate stood at 14.3 percent in June, down slightly from 14.6 percent in May.
Despite the risks, El-Nahas stressed that some sectors, particularly tourism, still have strong growth prospects despite the renewed US-Iran conflict.
