The ongoing US-Israeli conflict against Iran, which erupted on 28 February, is exerting significant pressure on global markets, with pronounced effects on the Egyptian economy.

According to Heba Monir, macroeconomic analyst at HC, Egypt‘s robust external position prior to the conflict has somewhat cushioned it against these external shocks.

Key indicators of resilience include:

• Net International Reserves (NIR) increased by 11% year-on-year to a record USD 52.7 billion in February, while deposits outside official reserves surged 1.26 times y-o-y to USD 13.4 billion.
• Banks’ Net Foreign Assets (NFA) expanded by 16% month-on-month and 3.39 times y-o-y to USD 29.5 billion in January.

Foreign Capital Outflows and Egyptian Pound Depreciation

Despite these strong fundamentals, the conflict triggered net foreign outflows of approximately USD 4 billion from Egypt’s treasury bills secondary market since 1 March.

This led to a 9% depreciation of the Egyptian pound (EGP) against the US dollar, reaching EGP 52.6/USD, demonstrating notable exchange rate flexibility.

Rising Oil Prices and Inflationary Pressures

The regional turmoil has also caused oil prices to surge by 48%, reaching USD 107 per barrel.

In response, the Egyptian government raised domestic prices of diesel, LPG cylinders, and gasoline by an average of 19% on 10 March, fueling additional inflationary pressures.

As a result, HC revised its annual headline inflation forecast for March to 14.3% y-o-y and 2.4% m-o-m, projecting an average inflation rate of 13–14% for 2026, up from previous estimates of 10–11% before the geopolitical shock.

This increase may delay the anticipated easing of monetary policy.

Treasury Yields and Interest Rate Expectations

To maintain the attractiveness of short-term investments, the Central Bank of Egypt (CBE) adjusted treasury bill yields, with the latest 12-month T-bill auction offering 23.4%, reflecting a positive real interest rate of 6.94% after accounting for inflation expectations and a 15% tax on foreign investors.

Given the geopolitical risks, pressures on Egypt’s foreign currency reserves, and updated inflation projections, experts anticipate that the Monetary Policy Committee (MPC) will maintain interest rates at its scheduled meeting on 2 April.

Outlook for the Egyptian Economy

Despite current challenges, Egypt’s economy continues to demonstrate resilience amid global uncertainty.

The country’s strong external reserves, adaptive exchange rate, and active fiscal measures provide a buffer against external shocks.

However, rising inflation, currency depreciation, and global oil volatility remain key factors that could influence monetary policy and economic stability in the coming months.