Fitch Ratings said Egyptian banks are better placed than they were in 2022 to absorb the fallout from the war on Iran, especially sizable hot-money outflows from debt markets and pressure on the exchange rate.
In a report issued on Monday, Fitch said, “Since the conflict began at the end of February, portfolio outflows from local-currency T-bills have exceeded $6 billion, adding to pressure on the Egyptian currency.” Since the outbreak of the US-Israeli war on Iran, the dollar exchange rate has reached a new high, nearing 53 Egyptian pounds for the first time.
But Fitch said Egyptian banks have stronger foreign-currency liquidity buffers than in 2022, with the sector’s net foreign assets rising to about $14.5 billion by the end of January 2026, the highest level since 2012. The agency added, “This provides strong capacity to absorb further portfolio outflows.”
Fitch said Egypt’s exposure to the fallout from the war on Iran remains indirect, and listed areas where the risks could be felt. “The state faces potential vulnerabilities, particularly related to energy import dependency, remittances, fiscal costs of energy subsidies, exchange-rate pressures, and access to international finance.”
The Ministry of Petroleum raised fuel prices exceptionally this month to curb the burden of importing petroleum products, while press reports quoted officials as saying the government had postponed planned international bond offerings amid rising risks linked to the war.
“Under our baseline, in which the conflict lasts less than a month and Brent averages $70 a barrel in 2026, risks to Egypt’s ratings should be contained, but a longer conflict or higher oil price would have a more substantial impact,” Fitch said in its report,.
Egypt suffered a shortage of dollar liquidity in 2023 and 2024 after large investments exited the debt instruments market, with outflows reaching about $20 billion in 2022. It did not regain investment momentum until after a sharp flotation of the pound in March 2024.
Brent crude has swung sharply as the war escalated and led to the closure of the Strait of Hormuz, one of the main shipping lanes for global fuel transport. Brent futures exceeded $103 a barrel today.
