Egyptian imports of Israeli gas were up heavily in 2023 and were expected to increase significanly in Q4

War on Egypt’s eastern border could have multidimensional impacts on government finances, tourism, and energy security

War in Gaza raises several economic risks for Egypt, potentially impacting the tourism sector, altering government spending priorities, disrupting energy supplies, and causing logistical delays. MNCs should expect continued sluggishness in consumer demand in 2024, with the possibility of refugee inflows and significantly higher energy prices driving already-high inflation. FrontierView expects a hiccup in the tourism recovery, with a drop in Israeli, American, and some European inflows through Q2 2024—impacting Egypt’s resilient consumer segment. Industrial firms will see increased disruptions due to load-shedding, increasing costs, and slowing production timelines, and should prepare for logistical disruptions. B2G players should continue to take a conservative risk management approach, and expect and plan for deferred payments and strong pressure for price reductions and increased flexibility on payment terms.


Violence and damage will worsen near the Rafah border crossing from Gaza into Egypt, risking a destabilizing spillover of the conflict amid rising public anger. As Israel continues heavy bombardment of the Gaza strip and the Palestinian death toll soars, Egyptian policymakers will be faced with a number of difficult choices. They must calibrate Egypt’s diplomatic stance in the crisis, allocate resources for humanitarian purposes, address disruptions to Egypt’s energy supply, deal with heightened regional instability, and potentially host a large influx of Palestinian refugees.

Humanitarian crisis

  • Egypt has ruled out taking in a mass influx of refugees from Gaza for now. It is likely to allow only temporary opening of a corridor for passage of the injured and humanitarian aid. Nevertheless, reports indicate that hospitals, schools, food stores, and fuel stations in North Sinai have made preparations to deal with a humanitarian crisis emanating from Gaza. A severe increase in the death toll in Gaza could raise pressure on Egyptian authorities to open the border. 
  • Vital infrastructure on the Palestinian side of the Rafah border crossing has been repeatedly bombed by Israel, complicating the opening of any humanitarian corridor.


  • Tourism in Egypt is sensitive to regional outbreaks of violence. Certain tourist hotspots are located in the Sinai Peninsula. Additionally, pro-Palestinian sentiment runs high among the Egyptian public. On October 8, 2023, an Egyptian policeman shot dead two Israeli tourists and a local guide in the city of Alexandria.
  • Egypt had been anticipating a very strong year for tourism in 2023, with arrivals up by 40% YOY already in the first seven months of 2023.


  • Egypt imported 4.6 bcm of natural gas from Israel in 2022, representing 7.6% of domestic consumption.
  • Israel’s Tamar gas field, a key source of exports to Egypt, has suspended production operations. The duration of the outage is uncertain. Supplies have been disrupted, with shipments from Israel declining 20% since the onset of the war. Gas exports from the Leviathan field have been rerouted through Jordan, but overall supplies have declined as Israel prioritizes domestic consumption.
  • Egypt’s government had hoped to increase imports of Israeli gas by more than 30% from October 2023, taking advantage of a seasonal fall in Israel’s domestic demand. Israel’s energy ministry in August announced a major increase in exports of natural gas to Egypt from the Tamar field.

Our View

Fiscal pressures

  • A rise in Egypt’s import bill as it seeks to replace lost supplies from the Tamar gas field would add pressure on Egypt’s already-strained balance of payments. 
  • Furthermore, the escalating conflict will likely raise overall public spending as the government sources aid and makes other preparations to accommodate and support Palestinians. This will further inflate the OPEX pool at the expense of CAPEX.
  • Though it remains unlikely for now, a major additional escalation to the conflict could spur an increase in global prices of food, energy, and other commodities. This would further inflate Egypt’s import bill, placing significant additional pressure on Egypt’s reserves and causing a deeper-than-expected depreciation in 2024.

Currency outlook

  • FrontierView continues to expect Egypt’s central bank to commence with a new round of currency devaluation by February 2024. Significant currency devaluation is likely to be accompanied by aggressive interest rate hikes and possibly by a restart of subsidy phaseouts on fuel and utility prices, keeping inflation very high in 2024.
  • Pressures on the EGP exchange rate will intensify further as a result of the fallout from Israel’s war with Hamas, although fears of regional instability could spur Egypt’s Gulf allies to be more forthcoming with financial inflows in 2024 compared to 2023.

Private consumption and tourism sector

  • FrontierView expects a sizable impact on the tourism sector given that the September to January period brings in a large number of European, Israeli, and other tourists. The disruption in tourism is likely to last through mid-2024.
  • Overall consumer spending will decline from its current levels in Q4 2023 and Q1 2024 as tourist inflows from the US, Israel, and some European countries drop in fear of instability within Egypt. Tourism from Asia and the wider Arab world should remain unaffected.

Security risks

  • The risk of organized terrorist action against Israeli targets in Egypt is very limited; government forces maintain strong control over the security situation in mainland Egypt. However, the risk of spontaneous and unorganized terrorist attacks persists.
  • Limited pro-Palestine demonstrations have taken place in Cairo, but these are unlikely to expand to encompass domestic issues, particularly with presidential elections approaching in December. Protests that are not pre-authorized remain banned.

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