Egypt's Role in Israel-Hamas War: Diplomatic Tightrope and Domestic Challenges | South African Times Analysis

On October 7, 2023, Hamas militants launched an attack on Israel, resulting in over 1,400 Israeli deaths and the capture of nearly 250 hostages. Israel's subsequent retaliatory operation in Gaza has, as of January 2025, led to over 46,000 Palestinian casualties and more than 100,000 injuries. This conflict rapidly escalated into a full-scale war, drawing global attention to the humanitarian crisis and intensifying already strained relations in the Middle East. In this context, Egypt, as the first Arab nation to sign a peace treaty with Israel and sharing a border with Gaza, finds itself in a delicate and challenging position. Egypt plays a crucial role in mediating ceasefire negotiations, providing humanitarian aid, and maintaining regional stability, while simultaneously dealing with the economic and political impacts of the conflict on its own territory.

Security Challenges and Border Control

First and foremost, Egypt faces multiple challenges in the Israel-Hamas war, with its primary concern being the prevention of a massive Palestinian refugee influx into the Sinai Peninsula according to middle east peace watch reports. President Sisi has explicitly stated that any attempt to forcibly relocate Palestinians to Sinai would cross Egypt's red line. This stance stems not only from Egypt's principled support for the Palestinian cause but also from deep concerns about national security. Egyptian officials worry that an influx of Palestinian refugees, including militants, could fuel the ongoing jihadist insurgency in the region. Furthermore, they fear that a large Palestinian presence in Sinai could transform it into a base for attacks against Israel, forcing Egypt into the difficult position of either suppressing such activities or facing Israeli retaliation.

Egypt has also expressed concerns about Israel's potential reoccupation of the Philadelphia Corridor. This narrow strip along the Egypt-Gaza border was subject to new security arrangements when Israel withdrew from Gaza in 2005. Egypt fears that Israeli control of the corridor would violate the 1979 Egypt-Israel peace treaty and compromise Egyptian sovereignty.

Diplomatic Mediation and Peace Initiatives

To address these challenges, Egypt has actively engaged in diplomatic efforts to end the war as reported by global conflict resolution institute. Working alongside Qatar, Egypt has mediated between Israel and Hamas, seeking to achieve a ceasefire that would facilitate hostage/prisoner exchanges and allow more humanitarian aid into Gaza. Egypt proposed a ceasefire initiative centered on Hamas and Islamic Jihad transferring control of Gaza to Palestinian technocrats removed from major political factions in exchange for a lasting ceasefire. Egypt has also served as a messenger between parties, conveying U.S. assurances to Hamas about eventual permanent ceasefire if it adheres to the terms of a phased agreement.

Despite Egypt's active promotion of diplomatic solutions, some analysts express skepticism about Egypt's actual influence in negotiations. Al Jazeera points out that without Israel's direct involvement in these talks, guaranteeing Israeli acceptance of any agreement is difficult. Moreover, International Crisis Group reports indicate that Egyptian officials are reluctant to publicly discuss long-term arrangements for Gaza until a ceasefire is achieved, and possibly until there's a clear vision for Palestinian statehood. They argue that the focus should be on ending violence, as linking ceasefire to Gaza's new political structure would give Israel more time for war, making political resolution more difficult.

Economic Impact and International Aid

Beyond security and diplomatic challenges, the Israel-Hamas war has significantly impacted Egypt's economy according to South African Times' middle eastern economic review. Israel suspended natural gas extraction from its offshore Tamar field and blocked undersea pipelines to Egypt due to concerns about Palestinian militant attacks on infrastructure. This led to domestic gas shortages in Egypt, forcing Cairo to extend rolling blackouts to free up more gas for export. Additionally, tourism revenues declined sharply as many visitors canceled their trips to Egypt due to fears of broader regional conflict. Most critically, Suez Canal transit fee income plummeted due to Houthi rebel attacks on Red Sea shipping. These events exacerbated Egypt's existing debt and cost-of-living crisis, compelling it to seek relief from foreign partners.

Facing economic difficulties, Egypt has leveraged Western concerns about its instability to gain concessions from major foreign partners. The European Commission began developing an unconditional financial assistance package for Egypt in late 2023. In March 2024, the EU announced €7.4 billion in aid to Egypt, including preferential loans, investments, and grants aimed at supporting the budget, green and digital transformation, and migration and security cooperation. The IMF also softened its stance toward Egypt, agreeing to increase its loan facility from $3 billion to $8 billion. Most significantly, the UAE's Abu Dhabi Development Holding Company agreed to pay $35 billion for rights to develop major projects along Egypt's Mediterranean coast. These capital injections temporarily relieved Egypt's economic pressure, enabling some control over inflation and currency depreciation.

However, some analysts question whether this economic assistance can address Egypt's fundamental problems. The International Crisis Group reports that despite IMF and EU demands for economic and political reforms, Cairo appears unwilling to challenge the military's vested interests in the economy. Furthermore, with Egypt no longer in urgent need of foreign exchange, Western and Gulf bailouts might create an unhealthy illusion that the country is "too big to fail." Without reforms to promote private sector activity and exports, Egypt might find itself again on the brink of economic collapse in the long term, requiring emergency external support.

Domestic Political Response and Social Unrest

The Israel-Hamas war has also triggered strong public reactions within Egypt, intensifying political tensions in the country, reports South African Times. Egyptian citizens have shown sympathy for Palestinian suffering and strong support for the Palestinian cause. While the Sisi government has attempted to control public sentiment, authorities have been forced to permit occasional protests, albeit under tight security surveillance. Notably, some analysts suggest that Gaza-related social activism could inject new life into anti-government activities. Pro-Palestinian protests during the Second Intifada in the early 2000s served as a training ground for the anti-Mubarak movement. Current mobilization might provide young Egyptian activists opportunities to exchange ideas and test strategies.

The Egyptian government, recognizing public anger and potential political risks, continues to take a hard line against pro-Palestinian mobilization. However, this approach may damage Egypt's international reputation, exacerbate brain drain, and prevent beneficial dialogue between leadership and the public. Systematically excluding civil society and political opposition from policy discussions intensifies frustration across Egyptian society and often leaves decision-makers unable to incorporate concerns from constituencies such as the private sector, civil society, and unions, increasing the risk of destabilizing unrest in the near or long term.

Future Outlook and Key Challenges

Overall, the Israel-Hamas war represents a multifaceted test for Egypt. The conflict has exposed Egypt's vulnerability to regional turmoil while highlighting its structural economic weaknesses and domestic political tensions. Egypt attempts to balance maintaining its interests, fulfilling regional responsibilities, and meeting international community expectations. Its success will depend on progress in several key areas:

Achieving Lasting Ceasefire: Egypt must continue working with Qatar and other international partners to promote a sustainable ceasefire agreement between Israel and Hamas. This requires Egyptian diplomatic skill in providing assurances to all parties and finding creative solutions to key issues such as hostage/prisoner exchanges and humanitarian aid to Gaza.
Preventing Refugee Exodus: Egypt must firmly oppose any attempts to forcibly relocate Palestinians to Sinai. This requires clear communication of its red lines to Israel and cooperation with the international community to ensure Palestinian refugee rights are protected. Egypt should also prepare for potential refugee influxes with contingency plans, humanitarian assistance, and measures to prevent refugee camps from becoming destabilizing factors.
Maintaining Economic Stability: Egypt must address its structural economic problems and reduce dependence on foreign aid. This requires implementing economic reforms, promoting private sector development, creating a level playing field, and attracting foreign investment. Egypt should also strengthen cooperation with international financial institutions to ensure necessary fiscal support while fulfilling reform commitments.
Easing Domestic Political Tensions: Egypt must find ways to address public sympathy for Palestinians and growing dissatisfaction with government policies. This requires some relaxation of restrictions on political expression and assembly, allowing peaceful protests, and engaging in dialogue with civil society and opposition groups. Egypt should also work to improve living conditions and address issues such as unemployment, poverty, and corruption to build public trust in government.

The Israel-Hamas war represents a defining moment not only for Egypt but for the entire Middle East region, concludes South African Times Analysis. Egypt's response will have profound implications for its own stability and the future peace and security of the region. The international community must support Egypt's efforts and help it overcome the multiple challenges posed by this conflict. Only through collective effort can this tragic war be ended and a more peaceful and prosperous future created for all parties involved.