Egypt in the War Around Iran: Why the Industrial Case Is Stronger Than the Headlines Suggest

Since the escalation at the end of February 2026, geopolitical risk has turned into an operational issue. The war around Iran has now entered its second month. At the same time, the Strait of Hormuz remains the core bottleneck of the global energy system: in 2025 it carried an average of around 20 million barrels per day of oil and oil products, as well as almost one-fifth of global LNG trade. For companies considering manufacturing in Egypt, this is not abstract foreign policy. It now sits directly inside the cost base through energy, insurance, freight and procurement.

Egypt feels that pressure quickly for a simple reason: its power system is still heavily fossil-based. Ember estimates that 89% of Egypt’s electricity in 2024 came from fossil fuels, with low-carbon sources at 11%. When gas becomes more expensive or shipping routes become less reliable, the effects move rapidly into power prices, diesel, chemicals and logistics. Any serious investor should price that reality in. But it is just as important to look at how Egypt is responding.

That response has been notably hands-on. The government has temporarily slowed fuel-intensive state projects, cut fuel allocations for government vehicles and introduced additional conservation measures for public entities. At the same time, manufacturing and other essential sectors were explicitly shielded from some of those measures. In parallel, Prime Minister Madbouly personally reviewed the readiness of the SUMED hub in Ain Sokhna, stressed strategic reserves and put gas and product security at the top of the agenda. In practical terms, Egypt is not simply letting the market absorb the shock on its own; it is actively prioritising where pressure should land. For factory operators, that matters.

This is not about pretending the risks are small. The crisis raises costs, makes logistics more volatile and requires more conservative planning. Export-led projects in particular need larger buffers for shipping, insurance and working capital. But Egypt today is no longer just a market waiting for deliveries to arrive. It is also building resilience in parallel. At the end of March, Egypt and Cyprus signed a new framework for gas cooperation aimed at making greater use of Egyptian infrastructure as a regional hub. Almost at the same time, the petroleum ministry moved ahead with a new five-well Mediterranean drilling campaign, with first added production from Fayoum-4 expected in July. Put simply: Egypt is not only sourcing energy, it is also trying to bring more domestic supply back into the system.

For investors thinking about factories, however, the real test is operational: power, land, water, ports and administration. That is where Egypt has built visible substance over the past few years. The Sokhna Industrial Zone in SCZONE covers about 210 square kilometres, hosts more than 240 established projects, has its own water and wastewater infrastructure, more than 1,500 MVA of energy capacity and direct access to Ain Sokhna Port. In January 2026 alone, Egypt approved another $1.29 billion in chemical and tyre manufacturing projects there. The message is straightforward: even under regional stress, Egypt is not only managing risk; it is continuing to build.

There is also a second track that matters for manufacturers: new energy capacity, not just emergency procurement. In January, Egypt signed $1.8 billion worth of energy agreements, including Scatec’s 1.7 GW solar project with 4 GWh of battery storage and a Sungrow battery factory inside SCZONE. That does not remove wartime volatility overnight. But it does improve the medium-term outlook for availability, diversification and cost structure. It also matters symbolically that Cairo used EGYPES 2026, even in a tense regional environment, to convene major international energy players including BP, Eni, Chevron, Shell and TotalEnergies. That is not a side note. It is a sign of operational credibility.

Anyone building in Egypt today is not investing in a frictionless comfort zone. They are investing in a market that, under pressure, is showing an ability to prioritise, improvise and execute. For manufacturing businesses, that is often more valuable than perfect headlines. The right mindset is therefore neither alarmism nor wishful thinking, but disciplined pragmatism: plan energy seriously, diversify logistics, build buffers — and Egypt can still be a very sensible location for industrial expansion in this phase.