1. ENCC institutional opening note

1.1 Short opening note

The Egyptian National Competitiveness Council (ENCC) issues this report as Report 1 within its analytical series on the economic impacts of the ongoing war between the United States and Iran. This release dated 14 April 2026 is the first update report after Baseline Report 0 published on 1 April 2026, and focuses on what has materially changed since then, and what these changes mean for the global and regional economy—especially for the Egyptian economy—consistent with the Council’s evidence-based approach, reliance on official sources, and disciplined policy reading.

2. Main title

Expected economic impacts of the ongoing war between the United States and Iran

3. Subtitle

Report 1 — the first analytical update after Baseline Report 0: what changed between 2 and 14 April 2026?

4. Executive summary

4.1 Executive summary

• The period covered by this update saw a fragile tactical de-escalation with a conditional ceasefire entering effect between 7 and 8 April, which lowered Brent from a weekly peak of $111.02 to around $94.75, before trading again near $93.87–$95.74 as doubts persisted about the ceasefire’s durability.
• The diplomatic track did not last; Islamabad talks collapsed on 11–12 April without agreement, followed by a U.S. announcement of a naval blockade on Iranian ports starting 13 April, re-raising the probability of direct maritime friction in the Gulf.
• In this update, the Strait of Hormuz is no longer merely a de facto constrained route; it has become a corridor governed by regulated passage and high fees, with a daily transit cap near 15 ships versus a prior baseline of 135 ships, entrenching a persistent geopolitical risk premium on energy and shipping.
• The strike on the South Pars field and the Assaluyeh complex on 6 April changed the baseline itself: the facility represented about 50% of Iran’s domestic petrochemical production and 85% of its petrochemical exports, creating a multi-year supply gap in LNG, petrochemicals, and fertilizers.
• Global reading shifted from a short regional shock to more entrenched stagflation risks, with the IMF cutting its 2026 global growth forecast to 3.0% and indicating emergency financing needs for fragile states between $20 and $50 billion.
• The release of the U.S. March CPI confirmed global inflation transmission, with a year-on-year rise of 3.3% and a monthly increase in energy prices of 10.9%.
• For Egypt, the picture deteriorated versus Report 0: the monthly import bill for gas and petroleum products rose from $560 million to $1.65 billion, and the gap between global procurement cost and the subsidized domestic price widened to about 45%.
• The Egyptian government responded with direct demand and consumption reduction measures, including commercial closing at 9:00 PM, remote work on Sundays for some public-sector employees, and about a 30% cut in fuel allocations for government vehicles.
• Egypt’s urban inflation rose to 15.2% in March versus 13.4% in February, and the Central Bank of Egypt increased its estimate of external debt service due in 2026 by $1.3 billion to $29.18 billion.
• The Suez Canal continued operating in a weak-recovery environment: 1,315 transits and about $449 million in revenues in early 2026; the Authority also canceled the 15% discount it had offered container ships—an implicit acknowledgment that the transit problem has become more political-security driven than price driven.

5. Update entry after Report 0

5.1 What did Baseline Report 0 establish?

Baseline Report 0 established the first reading of the war as an energy, shipping, financing, and inflation shock hitting the global and regional economy, with Egypt treated as the most relevant applied case in the Arab region from a competitiveness and business-environment perspective and in terms of shock absorption capacity. It also set the core scenario framework and fixed the priority of reading the war through its economic channels—not only its military dimension.

5.2 What does Report 1 specifically address?

This report focuses on the analytical gap between 2 and 14 April 2026: did the brief ceasefire, the subsequent diplomatic breakdown, and developments in energy, shipping, prices, and financing during this period change the reading in Report 0? Where did material change actually occur? And where did risks remain unchanged despite media noise?

5.3 Why does this update merit a standalone report?

Because the period did not merely add more news; it introduced changes that reshaped the risk profile itself: a shift from open escalation to a fragile ceasefire, then to negotiation failure and a U.S. naval blockade; a transformation of Hormuz from de facto congestion to a priced and constrained transit regime; and the emergence of structural deterioration in the region’s energy setup, with sharper shock transmission into the Egyptian economy. This justifies a standalone report rather than a short annex.

6. What materially changed since Report 0?

6.1 Conflict developments and escalation

The most important political-security change was a conditional ceasefire between the United States and Iran entering into effect between 7 and 8 April via Pakistani mediation, temporarily halting uncontrolled escalation. However, this development remained fragile because the ceasefire’s scope was contested—especially with Lebanon remaining an active, unresolved engagement arena within the understanding.

The subsequent material change was the collapse of Islamabad talks on 11–12 April after more than 14 hours of negotiations without agreement on Hormuz, sanctions, and nuclear capabilities, followed by Washington’s announcement of a naval blockade on all Iranian ports from 13 April. Economically, this means that the risk of full-scale war did not materialize, but it was replaced by the risk of extended, costly maritime and energy friction.

6.2 Energy and commodities developments

The period saw sharp volatility in energy prices, but the more important factor than price swings was the structural damage to energy and petrochemical facilities. The 6 April strike on South Pars/Assaluyeh removed a meaningful share of capacity from the market for years, making the temporary price decline after the ceasefire more psychological than structural.

Asian spot LNG prices maintained a jump of about 140% above the pre-war baseline, and urea reached $708 per ton—up about 48.8% from pre-war levels—linking the war directly to subsequent global food risks.

6.3 Shipping, logistics, and trade-route developments

The most fundamental change here is that the Strait of Hormuz is no longer read only as a geographic choke point, but as a priced geopolitical choke point. Transit fees were imposed that can reach $2 million per vessel, with daily transit reduced to about 15 vessels, while major Western operators continued to refrain due to insurance and legal/financial risk.

Vessel-tracking data on 12 April showed empty VLCCs abruptly turning back before entering the strait. Meanwhile, the Suez Canal Authority canceled its prior discount for container ships—signaling that transit pricing is no longer the decisive factor in shipping decisions; geopolitical and insurance risks are.

6.4 Financial markets and macro conditions

Macro reading moved from “a shock that may fade quickly” to “a medium-term stagflation environment.” Dollar moves and bond yields after the ceasefire gave markets a brief breathing space, but international institutions reaffirmed that economic damage had already occurred.

The U.S. inflation print at 3.3% and the 10.9% one-month jump in U.S. energy prices provided practical evidence that the shock is not only in commodity markets; it has moved into macro metrics that affect the timing of global monetary easing.

6.5 Egypt-specific developments

This is the area that saw the largest real change since Report 0. The war’s impact on Egypt moved from “high risk” to direct fiscal and operational pressure: the energy bill nearly tripled, explicit demand-reduction policies began, urban inflation rose, the central bank raised its external debt service estimate, while a significant gas discovery emerged but is medium-term.

At the same time, the pound improved relatively to 52.50 per USD by 14 April, five-year sovereign CDS fell to around 342 bps, and Egypt’s credit rating was affirmed at B/B with a stable outlook by Standard & Poor’s. These indicators suggest the market does not price an immediate break, but acknowledges a prolonged and costly pressure environment.

7. What did not materially change?

7.1 Baseline risks still in place

It did not materially change that Gulf-linked trade corridors remain non-operational at normal levels for many operators, that food risks arising from fertilizers and energy remain, and that net energy-importing economies—Egypt included—remain under structural pressure.

7.2 Risks remain high without a qualitative shift

The structural shortfall in Suez Canal revenues remains, emerging-market financing fragility remains elevated, and marine insurance costs and political-navigation risks remain a continuing burden—even if they did not worsen into a new qualitative spike during these days.

7.3 Contingent risks still under monitoring

The risk of the conflict widening into a broader Gulf confrontation or evolving into wider destruction of oil infrastructure remained a tail risk, but it did not materialize during this update window. Likewise, a full return of shipping flows to pre-crisis levels did not occur.

8. Updated impact assessment by level

8.1 Global economy

Global risk increased in terms of entrenchment, not only price peaks. The world is no longer facing a temporary shock, but a setting that may deliver weaker growth, higher inflation, and persistently higher energy and shipping costs. The dominant channel is energy + shipping + risk repricing + delayed monetary easing.

8.2 Major regional blocs

Europe remained the most fragile bloc among industrial economies due to dependence on LNG and energy sensitivity in industry. Asia—especially China and India—managed to secure relatively continued flows albeit at higher cost, giving them a relative competitiveness edge versus European industry. The dominant channel is energy security and unequal ability to absorb geopolitical cost.

8.3 Middle East

The Middle East remains the shock epicenter, but reading is now more differentiated: Gulf producers benefit on paper from prices, yet their actual export ability is constrained; producers outside the direct-risk zone capture relatively larger gains. The dominant channel is energy + sea lanes + a split between export-capable producers and constrained producers.

8.4 Egypt

In Egypt, risk rose materially in terms of the intensity of domestic shock transmission. As a net importer of energy and food, Egypt simultaneously faces a higher import bill, FX pressure, a structural shortfall in Suez revenues, higher costs for food and industrial inputs, and demand-reduction policies that can weaken domestic activity. The dominant channel is energy bill + imported inflation + external shipping + financing.

9. Egypt: updated exposure and impacts

9.1 Energy and fuel

This is the most important change in Report 1. The monthly import bill for gas and petroleum products jumped from $560 million to $1.65 billion, an increase of about $1.1 billion per month, while the cost gap between the global price and the subsidized domestic price widened to about 45%. This means Egypt’s energy shock is no longer a potential risk; it is direct fiscal bleeding pressuring the budget, the external account, and the domestic energy market.

Conversely, the discovery of 2 trillion cubic feet in Denise W-1 is an important medium-term support—especially given proximity to existing infrastructure—but it is not expected to deliver commercial production before late 2026 or 2027, and therefore does not provide immediate relief.

9.2 Food and inflation pass-through

The food channel became clearer than in Report 0. Urea reaching $708 per ton globally, and local fertilizer costs rising by up to about 243% in some cases, implies a forward risk of energy shock passing into agricultural production cost and then into domestic food prices.

The decision to raise the local wheat procurement price to EGP 2,500 per ardeb reflects an early preventive response, but also confirms the state is paying a higher price to secure domestic food. This is reinforced by urban inflation at 15.2% and core inflation rising to 14.0%.

9.3 Exchange rate, reserves, and financing conditions

Egypt benefited from relative resilience in absorbing the shock, but the external position became more sensitive. The pound improved slightly to 52.50 per USD by 14 April, while the Central Bank held the deposit rate at 19.00%, meaning defending monetary stability has become a priority.

At the same time, estimates indicate portfolio outflows of about $8 billion in March, with reserves near $52.83 billion. External debt service due in 2026 rose to $29.18 billion. The core message is that Egypt can still absorb the shock, but at a higher cost and with tighter policy space.

9.4 Suez Canal, shipping, and logistics

This file did not improve materially. Suez revenues of $449 million with 1,315 transits indicate the canal operates in only a limited recovery environment, while major carriers’ continued commitment to the Cape of Good Hope route implies that expecting a fast full recovery is no longer realistic.

Canceling the 15% discount for container ships suggests the Authority recognizes price incentives are insufficient to restore traffic while Red Sea and Gulf risks remain elevated—placing chronic pressure on one of Egypt’s most important FX sources.

9.5 Tourism, confidence, and business sentiment

The picture is more mixed. There is a clear decline in demand from some North American markets after travel advisories, but relatively strong continuity in European and regional tourism, with Red Sea resort occupancy exceeding 90% and a notable rise in transfers from some markets.

This indicates Egypt’s tourism sector has not entered a broad collapse, but has become more selective and more dependent on geographic demand composition. For the business environment, uncertainty in energy, shipping, and financing remains a drag on confidence, even if some service sectors remain more resilient.

9.6 Fiscal pressures and subsidy sensitivity

The most telling shift is the government’s move to forced demand reduction policies rather than absorbing the full shock through the budget. Early closing, cuts to government vehicle fuel, and remote work indicate fiscal pressure reached a level that requires direct administrative tools to reduce consumption and limit the import bill.

These policies have immediate economic costs: they reduce transaction velocity in the domestic economy, hit retail, restaurants, and small businesses, and may lower Q2 2026 growth in exchange for preserving foreign currency.

9.7 Industrial production and imported inputs

Private industrial activity weakened further, with PMI falling to 48.0 in March from 48.9 in February, indicating continued contraction. Estimates indicate transport and logistics costs rose about 30–35% for some producers, pressuring operating margins and weakening the ability to pass costs through amid fragile domestic demand.

This environment hits industrial competitiveness from both cost and demand sides, especially in energy-intensive sectors or those dependent on imported inputs such as textiles, plastics, and some heavy manufacturing segments.

9.8 Growth, competitiveness, and the business environment

Egypt’s bottom line in Report 1 is that the economy moved from shielding against the shock to managing its ongoing cost. High interest rates, energy costs, shipping uncertainty, erosion of some FX revenues, and other factors raise the cost of doing business, delay investment, and weaken firms’ planning capacity.

At the same time, avoiding an unfunded broad-based subsidy expansion and relying instead on price adjustments and control measures may strengthen—in creditors’ and international institutions’ view—confidence in macro management maturity. But this does not change the reality of a high competitive-pressure environment.

10. Update by time horizon

10.1 Current / immediate impact

The immediate risk of a full-scale military explosion declined with the ceasefire, then some concern returned after negotiation failure and the naval blockade. But energy, shipping, and fiscal risk in Egypt rose materially. The immediate impact now is partial global price easing versus rising domestic Egyptian pressure.

10.2 Short term

Short-term risk of food and energy inflation increased, especially in Egypt, with fertilizer and energy shocks likely translating into broader price pressures in summer and the upcoming harvest season. Demand-reduction measures in Egypt may also continue if loads rise ahead of summer.

10.3 Medium term

The risk of a medium-term shortage in petrochemicals and LNG increased due to strikes on South Pars and Ras Laffan, extending the period of high input costs and weakening energy/shipping recovery. For Egypt, this implies ongoing sensitivity in industry and energy costs even if some market indicators improve.

10.4 Long term

The long-term risk of restructuring energy and logistics routes did not fundamentally change, but became more likely to entrench. Conversely, the importance of rapidly developing new Egyptian discoveries increased if Egypt seeks to reduce future exposure to LNG imports and improve energy sovereignty by 2027.

11. Scenario update

11.1 Scenario A — limited and short conflict

Probability direction: Down. Reason: the failure of Islamabad talks and the U.S. naval blockade weakened the assumption of a rapid de-escalation and a near return to normal shipping and energy conditions. Implication for Egypt: near-term fiscal planning should no longer be built on the assumption of a quick and sustained drop in energy costs or a rapid normalization of trade routes.

11.2 Scenario B — prolonged but regionally contained conflict

Probability direction: Stable / remains the baseline scenario. Reason: negotiation setbacks, Lebanon remaining active, and Hormuz continuing under effective financial and security constraints. Implication for Egypt: persistently high energy bills, subsidy pressure, and ongoing need for domestic containment measures through the remainder of 2026.

11.3 Scenario C — major regional escalation

Probability direction: Up, relatively. Reason: the U.S. naval blockade raises the odds of direct friction in the strait even without a full multi-front breakdown. Implication for Egypt: additional escalation could push oil again above $120, widening external financing gaps and deepening pressure on the currency and subsidies.

11.4 Scenario D — maximal regional war

Probability direction: Down, relatively. Reason: core Gulf oil infrastructure was not hit in this window, and major Gulf states maintained relative neutrality. Implication for Egypt: potential Gulf support (deposits/financial facilities) remains within the realm of possibility rather than the region shifting into a broader collapse.

12. What does this mean now?

12.1 Strategic interpretation

The most important meaning of this update is that the ceasefire did not end the economic shock; it reshaped it. Instead of an open explosive shock, the world now faces a more complex shock: some political easing at the top, structural damage in energy, shipping, and petrochemicals underneath, then renewed tension after negotiation failure. The reading must shift from “did the risk end?” to “what type of risk is now entrenched?”

For Egypt, Report 1 confirms that Egypt is paying the war’s cost more directly than in Report 0. Shocks previously read as potential pressures on energy, inflation, and the exchange rate now appear in the import bill, consumption-reduction policies, tighter financing conditions, and pressures on industry and food.

Markets may calm temporarily, but damage in gas, petrochemicals, and shipping has become deeper than can be erased by a brief ceasefire announcement or a single negotiation round. This requires decision-makers, investors, and the private sector in Egypt to treat the situation not as a passing event, but as a new operating environment—at least for a time.

13. Council considerations and recommendations to government

13.1 Immediate macroeconomic priorities

The first priority is to treat the current situation as a prolonged compound shock, not a transient price wave. This means integrating energy, inflation, the external account, shipping, and food into one high-frequency monitoring dashboard rather than reacting to each file separately.

13.2 External sector and exchange-rate priorities

Top priority should be given to protecting external liquidity, slowing any additional FX bleeding, and strengthening demand-management tools for dollars through import and financing prioritization. The central bank’s decision to hold rates should be read as a temporary stability anchor, not a final solution.

13.3 Energy and fuel priorities

More precise demand management is needed rather than broad administrative tools with high economic cost. Decisions to accelerate development of new discoveries should be fast-tracked, and flexible financing solutions linked to future reserves should be considered to relieve immediate pressure on LNG and petroleum product imports.

13.4 Food priorities and inflation management

Food inflation should not be treated as a later file; fertilizer inflation today implies a high-probability risk in coming months. More targeted interventions are needed in critical agricultural input chains, with improved targeting and faster field monitoring of farm inputs and prices rather than waiting for full consumer pass-through.

13.5 Fiscal and financing priorities

The report’s results confirm absorbing the full shock through the budget is no longer sustainable. Priority should be a smart mix of expenditure control, targeting, and financing—while avoiding broad expansionary solutions that weaken fiscal sustainability.

13.6 Shipping, Suez Canal, and logistics priorities

The Suez file should remain a macro priority, not only a sectoral one. Weak recovery in the canal compounds the effect of energy and financing pressures on the external position. Continuous reading of major carriers’ behavior and timing of return versus continued Cape rerouting is essential.

13.7 Industry and competitiveness priorities

Industrial policy should temporarily focus on protecting continuity of the most energy- and imported-input-sensitive sectors, because current margin erosion can quickly translate into weaker investment, output, and competitiveness.

13.8 Egypt’s urgent priorities under the new update

• Protect external liquidity and foreign-currency inflows.
• Manage the energy import bill as the largest immediate risk.
• Front-load hedging against food inflation and agricultural inputs.
• Reduce the negative impact of demand-reduction measures on productive domestic activity.
• Accelerate any executable tracks that support medium-term domestic energy security.

14. Council considerations and recommendations to business and private investors

14.1 Overall business risk posture

The business community should treat the current period as a high-risk operating phase that is partially manageable, not as a passing daily shock. Persistent tension—even under a fragile ceasefire—means volatility and higher energy, shipping, and financing costs will remain part of the operating environment for the foreseeable horizon.

14.2 Energy-intensive sectors

Energy-intensive sectors need to revisit assumptions about fuel and gas costs and availability, build more conservative operating plans, and avoid assuming a near return to stable costs. Supply security should be weighed, not only price.

14.3 Food, retail, and consumer sectors

These sectors should prepare for continued pressure on purchasing power, higher input costs, and limited ability to pass through full increases. Inventory, pricing, and demand management become more critical than rapid quantitative expansion.

14.4 Trade, shipping, and logistics

Operators in trade and logistics should plan on the basis that the new cost regime for Hormuz may not be temporary, and that maritime risks may remain priced for longer. Route diversification, contract review, and re-pricing timelines are necessary steps.

14.5 Industry and firms dependent on imported inputs

Firms dependent on petrochemicals, plastics, or Gulf/regional fertilizers should revisit contracts, sourcing, and purchasing timing. A multi-year shortage in some intermediates could make reliance on traditional sources more fragile than before.

14.6 Tourism and hospitality

The tourism sector should continue re-centering toward more resilient European and regional markets, and avoid over-reliance on markets that showed higher sensitivity to security/political advisories. At the same time, sustained Red Sea demand can be leveraged as an important resilience channel.

14.7 Treasury management and financial obligations

The report reinforces the need to tighten liquidity management, stress-test exposure to FX, energy, and transport, and slow major investment commitments that assume a rapid drop in costs or interest rates. Preserving cash flexibility is more important than maximizing short-term expansion.

14.8 Private investment implications and strategic planning

Investors should plan on the basis of a priced geopolitical risk environment, not a rapid return to normal. Distinguishing matters between sectors that can absorb or benefit from repositioning and sectors that will remain under pressure due to energy, inputs, weak demand, or financing cost.

15. What should be monitored next?

15.1 Global indicators

• Outcomes of any subsequent negotiation rounds after the Islamabad failure.
• The degree of enforcement of the U.S. naval blockade on Iranian ports.
• Actual daily transit volume through the Strait of Hormuz.
• Brent and LNG price trajectories.
• Marine insurance trends and availability in the Gulf.
• Urea/fertilizer prices and agricultural input costs.

15.2 Regional indicators

• Whether strikes in the Lebanon arena continue or stop.
• The Gulf’s ability to maintain neutrality and avoid spillover into its oil infrastructure.
• Persistence or rollback of non-dollar settlement mechanisms in transit fees or trade.

15.3 Egypt indicators

• Monthly energy import bill and its direction.
• FX reserves and net foreign asset developments.
• Upcoming inflation readings, especially food, energy, and transport.
• Suez Canal traffic and revenues.
• PMI and private non-oil sector trends.
• Pound stability within an acceptable range.
• External debt service profile and sovereign financing conditions.

16. Institutional closing note

16.1 Closing note

Report 1 confirms the ceasefire did not eliminate the economic shock; it shifted it into a more complex phase: a shock with less political noise and more economic entrenchment, followed by renewed tension due to negotiation failure. For Egypt, the challenge is no longer only absorbing war pressures, but preventing them from turning into a prolonged environment of higher costs, weaker margins, and reduced competitiveness—making regular institutional monitoring a necessity, not an option.

17. Sources and evidence note

17.1 Sources and evidence note

This report draws on the attached deep research material for the second update after Baseline Report 0, built on high-trust official, institutional, market, and analytical sources—consistent with the Council’s method of using official data, trusted international organizations, and recognized market reports, while using AI as an assisting tool subject to specialized human review before publication or policy use.

Official and institutional sources: the International Monetary Fund, World Trade Organization, Central Bank of Egypt, Suez Canal Authority, Ministry of Petroleum, CAPMAS, and relevant Egyptian and international official bodies.

Market and sector sources: shipping, energy, insurance, and commodities data providers, and the referenced credit and analytical institutions cited in the attached research material.

High-trust analytical and media sources: the reference international analytical and news sources used inside the attached research file.