Key Takeaways:
Egypt is leading a diplomatic push to de-escalate US-Iran hostilities that have already cost Cairo more than $10 billion in lost Suez Canal revenue.
Egypt sees a path for the US and Iran to resume peace talks after two weeks of tit-for-tat attacks, Foreign Minister Badr Abdelatty said, as Cairo pushes for a diplomatic solution alongside Pakistan and Qatar.
"The crisis is bridgeable," Abdelatty said in a July 23 interview, adding that Egypt is in daily contact with the warring parties, Persian Gulf states, Turkey and others to encourage a return to the terms of a Memorandum of Understanding signed in mid-June.
The June 17 agreement established a 60-day negotiating clock toward a permanent end to hostilities and reopening of the Strait of Hormuz, through which 20 percent of the world's oil normally flows. Since the deal collapsed, the US has conducted strikes deeper into Iran and fired on a ship accused of breaking its naval blockade of Iranian ports, while Iran has retaliated with missiles and drones targeting US allies.
The stakes extend beyond the immediate conflict. Suez Canal receipts — a key source of hard currency for Egypt — have fallen more than 60 percent since the crisis began, resulting in losses exceeding $10 billion between January 2024 and March 2025, according to President Abdel-Fattah El-Sisi. A prolonged disruption risks further pressure on Egypt's fragile economy and sustained upward pressure on global energy prices.
Pakistan's Foreign Ministry on Thursday rejected suggestions that Islamabad had abandoned mediation efforts after brokering the initial ceasefire last month. "Let me dispel the impression that Pakistan has done hands up, and this is not the case," spokesperson Tahir Andrabi said, adding that the parties "will have to come to the negotiating table to settle all outstanding issues."
Even the top negotiators for the US and Iran indicated they have not walked away from talks. Vice President JD Vance, in a podcast interview with Joe Rogan that aired Wednesday, said the Trump administration is "not going to bomb and bomb and bomb" and that "diplomacy is another tool." Iran's parliament speaker and lead negotiator, Mohammad Bagher Qalibaf, said the country is not declaring the interim deal void, though its commitment depends on continued implementation by the US.
The core dispute centers on management of the Strait of Hormuz, Tehran's greatest source of leverage. Iran claims authority to arrange shipping transit through the waterway, while the US insists on free passage and has tried to establish an alternate route along Oman's coast. The language in the interim deal is vague on this point, leaving both sides room to interpret the terms differently.
The Red Sea crisis has compounded the disruption. Houthi attacks on international shipping since November 2023 have reduced maritime traffic through the Bab al Mandab Strait by 55 percent, according to the International Transport Forum. The combination of threats at both chokepoints — the Red Sea and the Strait of Hormuz — has reshaped global shipping routes, with vessels circumnavigating Africa instead of transiting the Suez Canal, adding 10 to 12 days of sailing time.
The geopolitical risk premium in oil markets remains elevated, though crude prices have yet to spike to levels seen during previous Gulf conflicts. The last time a similar blockade threatened the Strait of Hormuz — during the Iran-Iraq tanker war in the 1980s — oil prices rose more than 20 percent over six months before the US Navy escorted reflagged Kuwaiti tankers through the waterway.
For now, mediators from Egypt, Pakistan and Qatar continue backchannel efforts, according to regional officials who spoke on condition of anonymity. They noted that neither side has formally notified Pakistan of its withdrawal from the initial ceasefire agreement. "It can be put on the backburner, but it stays," Andrabi said, adding that "whenever the parties exhaust the logic of escalation, the formula for peace is there."
This article is for informational purposes only and does not constitute investment advice.
