Egypt’s war prep: The strait, the barrel, and the loaf of bread

Tension has returned to the Strait of Hormuz. Iran is once again targeting oil tankers that stray from its designated lanes; the Americans, in turn, have resumed airstrikes against military targets inside Iran.

The diplomatic track launched by the memorandum of understanding, which had halted military operations roughly a month ago, has collapsed. On July 12, the Iranians declared the Strait of Hormuz closed. Trump retaliated by reinstating the naval blockade on Iranian ports; he even revealed US plans to secure the free flow of shipping in exchange for a 20% tariff on the value of transit oil—before backtracking, as usual, on this idiotic proposal once he realized it actually bolstered the Iranian stance of levying transit fees on international shipping.

Because this renewed crisis threatens catastrophic energy price spikes—shocks that will inevitably spill over into food markets—a country like Egypt must urgently adopt alternative policies to survive this new global reality.

$150 a barrel: the catastrophic scenario

Oil markets reacted immediately to these rapid developments: Brent crude jumped by roughly 13% in recent days as shipping traffic through the Strait slowed to a crawl. No one knows how long this escalation will last, nor how deeply it will choke oil exports from the Arabian Gulf.

In the previous standoff, WTI prices leapt from $63 a barrel in late February to $112 on April 7. Yet they stopped short of outright catastrophe; the United States and China tapped their strategic reserves to satisfy domestic demand and, in the American case, to stabilize global markets.

But this time, the worst fears may materialize. If the conflict drags on and the Strait remains shuttered, the buffer is gone: the first closure has already depleted much of our reserves; a prolonged crisis with exhausted buffers could, as ExxonMobil’s chairman told Reuters, send prices soaring to $150 or $160 a barrel.

And this is before considering the worst-case scenario: Trump moves to target Iranian oil infrastructure, and Iran retaliates by striking refineries and wells across the Gulf states. If that happens, it would cripple production capacity on both sides of the Gulf, potentially for years; a medium-term energy catastrophe.

Why we must change—and how

The brief window during which Iran reopened the Strait of Hormuz was not enough to replenish global oil markets. The same is true for raw materials needed for urea fertilizer; inventories failed to recover during the short-lived truce, leaving the world gripped by a persistent fertilizer shortage.

To be sure, highly populated food consumers like India managed to navigate the spring without a major shock, cushioned by their fertilizer reserves. But with disruptions resuming, the specter of food shortages will inevitably loom this coming winter.

If winter crop yields plummet, the fallout will not stop at India’s borders: a nation of that demographic scale will inevitably resort to massive imports to offset its domestic shortfall, driving global food prices to new heights.

What does this mean for a net energy and food importer like Egypt?

We are far more exposed to these shocks than others in the near term. This leaves us doubly exposed: first through our heavy reliance on imported food—especially wheat—and second through the threat of a depreciating pound as hot money flees, driving up the cost of everything we cannot grow or make ourselves.

As previous crises have demonstrated—particularly the war in Ukraine and the last round of hostilities with Iran—such shocks induce stagflation: a grinding mix of economic slowdown and soaring inflation. They drag us back into the very vortex that nearly swallowed us in 2022, a crisis we only escaped through a once-in-a-generation windfall like the Ras El-Hekma deal.

How, then, can the government pre-empt this situation before it spirals?

We must understand that this renewed conflict marks our entry into a fundamentally new world. The old status quo is not coming back; we must take concrete steps to adapt to this reality.

On food, we must restructure our crop patterns over the near-to-medium term—meaning the next one to five years. This means shrinking the acreage of fruits and vegetables cultivated for export to Europe, reallocating that land to essential staples like wheat and rice. While the government has already taken initial steps here, it must accelerate its efforts and ensure this strategy remains locked in for the years ahead.

On energy, we must institute precautionary measures starting today, rooted in consumption rationing—done seriously this time, not with the erratic flip-flopping we witnessed during the war.

We need to re-evaluate our reliance on energy-intensive industries

To be sure, pushing ahead with restoring domestic gas production—a move the government has already initiated by paying down arrears owed to foreign energy extraction companies—is necessary. But it cannot substitute for a fundamental rethink of our energy strategy: we must aggressively scale up renewable energy’s share of Egypt’s mix to curb our dependence on imported oil and gas.

Furthermore, we need to re-evaluate policies that lean on energy-intensive sectors like fertilizer and cement as our primary vehicles for maximizing export revenues. Expanding these industries is structurally incompatible with chronic volatility in global energy markets; indeed, it is completely out of step with our domestic reality as a net energy importer.

The bottom line is that the fundamentals are shifting—rapidly, and likely for the long haul—threatening the very foundations of economic growth and the essentials of life, chief among them food. We must reckon with these realities today: before we wake, like the Sleepers of the Cave, to a world that no longer exists.