Tensions and ongoing conflicts in the Red Sea region, especially the increase in Houthi armed activity, have had a profound impact on the economic activity of the Suez Canal in Egypt. In February 2024, U.S. and British airstrikes on Houthi armed targets further aggravated the instability in the region, leading to large-scale shutdowns on Red Sea international routes and a crash in Suez Canal revenue. This is undoubtedly a heavy blow to the Egyptian economy, especially in the context of the countrys already facing $1.897 billion in foreign debt and $422,6 billion in payments.

The Suez Canal has been a key waterway linking Europe and Asia, bringing tens of billions of dollars in revenue to Egypt every year, and is one of the country’s major foreign exchange sources. However, due to the recent Red Sea crisis, the revenue of the canal has dropped significantly, and according to Egyptian President Sisi revealed that the revenue of the Suez Canal has “reduced by 40 to 50 percent”.

The worsening situation in the Red Sea has not only affected the revenue of the Suez Canal, but has also had a broad impact on Egypt’s foreign exchange revenue. The sharp decline in foreign exchange revenue, the conflict impact of tourism and the increasing pressure on foreign debt together pose major challenges for the Egyptian economy. In addition, the ongoing devaluation of the Egyptian pound has intensified domestic price rise, leading to an increase in the cost of living for the people.

Under this series of economic pressures, the Egyptian government faces a huge challenge inining economic stability and development.The international community is growing concern about Egypt’s economic outlook, and the International Monetary Fund (IMF) and international credit rating agencies such as Moody’s have lowered Egypt’s economic growth expectations and adjusted Egypt’s credit rating outlook.

In addition, Egypt’s trade with China has also been affected by the Red Sea crisis, with China’s total bilateral trade with Egypt declining in 2023, further highlighting the potential impact of tensions in the Red Sea region on global trade.

In the face of this series of challenges, the Egyptian government and the international community need to take urgent measures to alleviate economic pressures, while seeking political and diplomatic ways to reduce regional tensions in order to safeguard the Suez Canal and regional stability. Foreign trade companies that trade with Egypt also need to pay close attention to regional developments and adjust trade strategies in time to reduce potential trade risks.