Mounting concerns over the escalating conflict between Israel and Iran sent ripples through the Egyptian economy today, triggering a sharp depreciation of the pound against the US dollar and a significant dip in the stock market.
The greenback surged by over 0.85 Egyptian pounds, while the benchmark EGX30 index plummeted by 7.6% in early trading, primarily driven by foreign investor sell-offs, before recovering some ground to close down 4.6%.
The US dollar reached 50.68 pounds at Banque Misr and the National Bank of Egypt on Sunday, up from 49.82 pounds last Thursday. Mohamed Abdel Aal, a board member at the Egyptian Gulf Bank and a banking expert, attributed the jump to foreign investors exiting the Egyptian market due to regional anxieties.
The geopolitical turmoil intensified after the Israeli army launched “Operation Rising Lion,” described as a “pre-emptive strike” on Iran's nuclear program and other military targets, on Friday morning.
Iran retaliated Friday evening, targeting dozens of military objectives, bases, and infrastructure. The Iranian army claimed success in striking the Israeli Ministry of Defense despite jamming and interception attempts.
Abdel Aal told Al Manassa that he expects the dollar's movement in the local market to remain limited in the near term, forecasting a range of 51 to 52 pounds, contingent on foreign capital inflows and the persistence of geopolitical tensions.
The escalating crisis also spurred a rush to gold as a safe haven in the Egyptian market. Gold prices climbed by approximately 185 pounds over two days, with the most traded 21-carat gold reaching 4,900 pounds today, according to Nadi Naguib, former Secretary-General of the Gold Division at the Cairo Chamber of Commerce, in remarks to Al Manassa.
Naguib anticipates further increases in gold prices if political tensions between Iran and Israel continue, suggesting that 21-carat gold could hit 5,000 pounds per gram. However, he added that if the conflict de-escalates, prices could retreat to around 4,700 pounds for the same carat.
The tourism sector is also feeling the pinch, with EgyptAir cancelling flights to several Arab cities (Beirut, Amman, Baghdad, and Erbil airports). A source from the International Transport Division at the Cairo Chamber of Commerce told Al Manassa that EgyptAir is attempting to avoid missile flight paths between Iran and Israel.
The source added that the disruptions could extend to other countries if the conflict broadens, though the overall impact on tourism remains “limited” so far.
In a direct acknowledgement of the regional developments, the government announced yesterday the postponement of the Grand Egyptian Museum's grand opening from its planned July 3rd date to the fourth quarter of this year, citing “developments in regional events.”
Meanwhile, industrial activity has been significantly curtailed. Beyond the previously announced halt in gas supply to energy-intensive industries last Friday due to the disruption of Israeli gas imports, Al-Sharq Bloomberg reported today that the government has also temporarily suspended fuel oil (mazut) supply to factories to prioritize electricity generation.
In response, Abu Qir Fertilizers and Chemical Industries announced today that it has begun implementing an intensive, round-the-clock maintenance plan for its factories until operating conditions improve, citing the repercussions of the Middle East conflict and the impact on natural gas supplies, according to a company disclosure to the stock exchange.
Strategic reserves hold steady
Amidst the escalating conflict, the Egyptian government has repeatedly affirmed the sufficiency of its strategic reserves of essential commodities to counter any supply chain disruptions.
Ahmed Kamal, spokesperson for the Ministry of Supply, told Al Manassa that sugar reserves are sufficient for 14.1 months, edible oil for 4 months, frozen poultry for 6.1 months, and fresh meat for 5.5 months. He added that wheat reserves stand at 6.3 months, with the ministry continuing to receive local wheat from farmers during the ongoing supply season.
