When the United Arab Emirates (UAE) announced in early May that Egyptian President Abdel Fattah El-Sisi visited Egyptian troops stationed at a base in the UAE, showing photos of him shaking hands with airmen, most Egyptians were surprised. The images landed amid anxiety over the possibility of Egyptian involvement in a deeply unpopular regional war with Iran.
To many Egyptians, it was a painful reminder of the gap between Sisi’s rhetoric of the country’s “central role” in foreign policy, and Cairo’s actual diminished position. Once a dominant regional actor, Egypt now finds itself managing the risks of a war it did not want: economic shocks, an emboldened Israel, regional instability, and, should the shaky ceasefire collapse, renewed pressure to enter the conflict.
That posture did not emerge overnight. Egypt’s defeat in the 1967 Six-Day War ended its bid for regional leadership, while Anwar El-Sadat’s realignment toward the United States after 1973 entrenched a more defensive foreign policy. Under Hosni Mubarak, that logic hardened into a strategy focused less on shaping the region than on protecting revenue streams, securing external financing, and avoiding wars Egypt cannot afford. Under Sisi, that defensive logic has been deepened by debt-fueled development and external financing. In the Iran war, Egypt still seeks balance, but dependency has turned its foreign policy into damage limitation.
Economic shackles
Egypt’s economy has long been a semi-rentier one, where foreign currency flows primarily from Suez Canal fees, remittances, and tourism rather than from productive economic activities. The military takeover of July 2013 exacerbated this by redirecting state expenditure toward megaprojects, leaving the economy saddled with debt-financed infrastructure and recurrent economic crises. That structural dependence on rents has made Egypt extremely vulnerable to the fuel and food prices shocks produced by the Iran war.
Successive rounds of borrowing under President Sisi have left Cairo reliant on the Gulf, Europe, the United States, and the IMF for the foreign currency needed to service interest payments and cover imports. When the UAE requested that Pakistan—Egypt’s partner in mediating between the US and Iran—repay $3.5 billion in loans and deported thousands of Pakistani Shia migrant workers, Cairo was reminded of its vulnerabilities. Indeed, remittances in 2025 alone were worth $41.5 billion, roughly 12 percent of the country’s GDP, with much of that money originating from Egyptian migrant labor in the Gulf. Gulf states also own around 35 percent of Egypt’s external debt and are a major source of financing to the Egyptian government through asset purchases and investments.
To hedge this dependency, Egypt has pursued a diversification strategy, as reflected in its “Strategic Balancing” discourse, but it has proven its limitations. While Egypt has deepened ties with China and Russia, both countries offered no financing prospects to Egypt, nor are they likely to offer the country meaningful military or diplomatic support that could end its dependence on its traditional donors. Egypt’s balancing between Russia and Ukraine also shows the limits of this strategy: Egypt was able to maintain business as usual with both sides and to brush aside European pressure to isolate Russia, largely because the US did not force a choice. But when the US learned of Egyptian plans to sell rockets to Russia, it pressured Egypt to abandon the deal.
The diversification strategy has, however, proven useful as a bargaining chip with the European Union. Indeed, the EU’s strategic partnerships with Southern Mediterranean states, including Egypt, are partly shaped by Brussels’ concern that Russia and China have expanded their influence in the region.
Regionally, Egypt’s strategy of juggling rival partners has yielded some room for maneuver, including the country’s decision not to join the Saudi-led 2015 military intervention in Yemen. However, Egypt’s alignment with Saudi Arabia, and its opposition to the Emirati-backed Rapid Support Forces in Sudan, have had to be carefully calibrated to avoid provoking the UAE, which retains leverage through Egyptian migrant labor, investment, deposits, and debt exposure.
Between the government’s decision to raise fuel prices by up to 30 percent and the inflationary impact of the war, the conflict was felt in every Egyptian household
The economic interests of Egypt’s military and political figures have also at times deepened the country’s vulnerabilities. The clearest illustration is the $35 billion, 15-year gas deal Egypt signed with Israel, with windfall profits reportedly going to a General Intelligence-controlled company, at a time of growing hostility between the two countries and increasing Israeli involvement in regional conflicts. When Israel temporarily cut off gas exports to Egypt in the opening days of the Iran war, the consequences of that deal became immediately apparent.
The Iran war exposed the full fragility of this structure. Egypt lost access to key gas and oil suppliers Israel and Kuwait, while global energy prices surged. Disruptions to Gulf economies, high season tourism, and investor confidence further strained foreign currency inflows into the country, while Suez Canal revenue dropped by 38 percent. The Egyptian pound has been among the worst performing currency during the first month of the war, as inflation rose to over 15 percent, impacting a population already facing financial stress. In 2019-2020 already, official poverty rates stood at almost 30 percent, while experts estimate the number to be at least 35.7 percent, as the government has not released updated figures. Between the government’s decision to raise fuel prices by up to 30 percent and the inflationary impact of the war, the conflict was felt in every Egyptian household.
While Egypt managed to withstand the economic shock, by diversifying oil and gas suppliers, a resumption of hostilities would strain its finances further. Gulf support may be harder to secure this time, with capital likely redirected toward domestic reconstruction or other regional priorities. European options are similarly constrained by competing demands for rearmament or for Ukraine and the Middle East. For now, Egyptian officials appear to be betting that its donors still believe that the country is “too big to fail.”
In search of the status quo
Egypt has long recognized that the US will not allow any regional actor to challenge Israel’s qualitative military edge. For Egypt, this has meant managing relations with an increasingly hawkish Israel in a manner that would not severely antagonize it.
That calculus may help explain why Egypt has quietly valued the existence of powers capable of balancing Israel. Egypt would not ally itself with them, but as long as Israel was isolated in the region and surrounded by powerful rivals, Egyptian-Israeli relations were lukewarm. The Abraham Accords disrupted this balance, as Israel grew closer to the UAE, Bahrain, and Morocco, and risked breaking Egypt’s monopoly as the main broker between Israel and the Palestinian factions. Iran served as a useful counterbalance to Israel’s growing influence in the region. This logic has likely become more dominant as Israel grew closer to Egypt’s rival Ethiopia and Prime Minister Netanyahu announced a new alliance to counter an undefined “Sunni axis,” which may include Egypt. A total Iranian defeat, in the eyes of Egyptian officials, would therefore risk further emboldening Israel.
Egypt’s resistance to Iranian collapse is not only about balancing Israel’s hegemony. Cairo has a longstanding aversion to state failure near its borders rooted in its own experience. Egyptian officials have consistently opposed regime changes, preferring functional states or semi-state actors, near their borders over ungoverned spaces that follow regime collapse. Egypt, which fought a long and bloody battle against armed groups within its borders between 2011 and 2023, supported Syria’s Bashar al-Assad, as it feared that the collapse of the Syrian state would lead to transnational militancy. The potential collapse of the Iranian state is therefore seen as extremely dangerous to the entire region and Egypt would prefer to see a stable and unified Iran emerging from this conflict.
The third strand of Egypt’s position is deep skepticism toward military solutions. The Egyptian intervention in Yemen during the 1960s and successive rounds of fighting with Israel left a lasting institutional skepticism toward the use of military force to resolve conflicts. Egyptian policymakers have applied this skepticism consistently, from the Israeli invasion of Lebanon, to Gaza, to Sudan, to Syria, and Libya, and also Egypt’s reluctance to join military coalitions seeking to open the Hormuz or Bab al-Mandab straits. It should therefore be unsurprising that Egypt has been deeply skeptical about the American-Israeli campaign succeeding in Iran.
Egypt’s playbook
Faced with the current crisis, Egypt has pursued the same playbook it deployed during the genocide in Gaza: pragmatic mediation, coalition building, and converting regional instability into financial and diplomatic leverage.
Egypt has played a central role in efforts to mediate between the United States and Iran. Egypt had already re-engaged the Iranians in the period preceding the war, placing Egypt as one of the few credible actors to open needed negotiation channels. Egypt has also worked closely with Pakistan, Türkiye, and later Saudi Arabia to mediate as part of their wider effort to de-escalate in the region.
At the same time, Egypt has tried to reassure Gulf partners without entering the war directly. While Egypt has rejected pressure by the UAE to deploy troops in the Strait of Hormuz, it has deployed air-defense systems in several Gulf states. Egypt also issued 17 condemnations of Iranian attacks against Gulf states, seven of which were related to the UAE specifically, since the start of hostilities.
Egypt has also worked to convert regional instability into diplomatic and financial resources, positioning itself as an indispensable partner to actors that have the most to lose from Egyptian instability
Egypt has also worked to convert regional instability into diplomatic and financial resources, positioning itself as an indispensable partner to actors that have the most to lose from Egyptian instability. The approach is well-tested: Egypt has leveraged its role in preventing the departure of boats carrying irregular migrants, and its cooperation in receiving its returned nationals to secure financial and diplomatic support from Europe. Faced with Israeli and American pressure to transfer Palestinians from Gaza to Sinai, Egypt successfully mobilized European and Gulf opposition by warning that such a move could destabilize Egypt and put its peace agreement with Israel at risk. During the current crisis, Egypt has repeatedly attempted to secure financing from Europe and the US, citing the negative impact of the conflict on Egypt and its capacity to assist with migration control.
Where Egypt’s playbook has visibly failed is in its repeated calls for closer Arab military cooperation. Cairo has invoked regional instability as grounds for a collective Arab security response, but the conditions do not exist. Arab states are deeply divided and their competition has repeatedly flared-up into conflicts, most recently between Saudi Arabia and the UAE in Yemen and Sudan. Egypt’s early position toward Iran has also drawn harsh criticism of Gulf-aligned media outlets.
What Egyptian decision makers are left with is limiting damage. Egypt’s best-case scenario is a return to a regional order that no longer exists. What Cairo realistically seeks is a rapid end to the war and the survival of an Iranian regime powerful enough to prevent state collapse and counterbalance Israel, but too diminished to threaten regional stability or seek nuclear weapons.
Success, however, may ultimately be measured by narrower markers: staying out of the war, preserving a mediation channel, and securing enough financing to absorb the shock. It is, for a country that was a driving force in Arab politics, a measure of how far Egypt’s horizons have contracted.
Hussein Baoumi is an independent consultant specializing in MENA foreign policy and EU-MENA relations.