Downbeat prospects for the Suez Canal - Economy - Al-Ahram Weekly
Losses in revenue from the Suez Canal are likely to grow this year with the escalating tensions in the region in the wake of the Israel-Iran war.
In the year and a half after Israel's war on Gaza began in October 2023, the Suez Canal lost around $8 billion in revenues. Houthi group attacks in the Red Sea in solidarity with the Palestinians against the Israeli war on Gaza also caused major shipping lines to divert their route through the Suez Canal to the longer one around the Cape of Good Hope.
Egypt has lost 'approximately $800 million in monthly revenues from the Suez Canal, with a total aggregate amount of $8 billion, since the beginning of Israel's war on Gaza,' wrote Foreign Minister Badr Abdelatty in an article in the British maritime publication Lloyd's List in May.
The canal brought in an unprecedented $9.4 billion in revenues in fiscal year 2022-23.
It is one of Egypt's main sources of foreign currency, and a decline in its revenues will put pressure on the country's foreign-exchange reserves, likely causing the dollar to strengthen against the Egyptian pound, Karim Adel, head of the Al-Adl Centre for Economic and Strategic Studies, told Al-Ahram Weekly.
Mohamed Anis, an economic expert, told the Weekly that the Bab Al-Mandeb Strait which links the Red Sea to the Indian Ocean cannot support additional tensions that negatively affect the global shipping companies' passage through the strait.
This Israel-Iran war adds to the pressure on Suez Canal revenues and therefore the Egyptian economy. The Bab Al-Mandeb is a vital trade route between the Mediterranean and Asia. Vessels carrying goods between Europe and Asia, as well as oil from the Middle East to Europe and North America, pass through it when navigating the Suez Canal.
Anis added that lower maritime traffic through the canal is expected to have a significant impact on revenues, forecasting that they will shrink to $2.5 billion in 2025. In 2024, revenues stood at $3.9 billion, he said.
Moreover, with the flare-up of further conflict in the region, reducing Suez Canal transit fees may no longer be effective in attracting shipping companies back to the route, as many have shifted to the Cape of Good Hope, he explained.
In May, the Suez Canal Authority (SCA) announced a 90-day 15 per cent discount on transit fees for container ships with a net tonnage of 130,000 tons or more, whether loaded or empty. The discount was meant to encourage the shipping companies to gradually return to the Suez Canal following a brief ceasefire in Gaza and a truce between the US and the Houthis.
Another worrying factor is the possibility of the closure of the Strait of Hormuz. This is the primary export route for Gulf oil, which accounts for about 20 per cent of global oil supplies. It is also critical for natural gas exports, with Qatar controlling a large portion of the Gulf's 30 per cent share, Anis said.
He warned that any consequences of the Israel-Iran war affecting the Strait of Hormuz could severely disrupt the global oil trade, creating a sharp supply shortfall and driving up prices from the cost of crude itself to shipping and operational expenses.
Oil prices could reach $120 per barrel should the US intervene militarily against Iran and the strait be completely closed, removing approximately four million barrels per day from the global market, Anis said.
Trade volumes through the strait exceed $1 trillion annually, with over 2.5 billion tons of cargo passing through each year, Adel said. Raw materials such as grain, iron ore, and cement account for 22 per cent, while the container trade carrying finished goods to the Gulf countries makes up about 20 per cent.
* A version of this article appears in print in the 19 June, 2025 edition of Al-Ahram Weekly
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