As global geopolitical tensions rise, the recent escalation between Iran and Israel has sent shockwaves through global energy markets. For Egypt, the impact has been immediate and significant.

Heavily dependent on natural gas to generate electricity, Egypt now faces mounting challenges in maintaining a stable energy supply amid regional instability and increasing domestic demand. This geopolitical upheaval has underscored the urgent need for Egypt to strategically rationalize electricity consumption, not just to reduce costs, but to safeguard national energy security and support sustainable economic growth.

Against this backdrop, Egypt is implementing comprehensive measures to optimize energy use, secure supply chains, and accelerate its transition toward renewable energy. These efforts aim to help the country navigate the current crisis while building resilience for the future.

Egypt’s Energy Security Challenges and Responses

Egypt's electricity sector is heavily reliant on natural gas. In 2024, it accounted for 81.7% of the country’s electricity generation, according to data from the international energy think tank Ember. This dependence makes Egypt vulnerable to disruptions in natural gas supply and price fluctuations.

The challenge is further compounded by seasonal consumption peaks, especially during hot summer months, when demand for air conditioning soars. This puts additional strain on the national grid and increases the risk of outages.

Prior to the recent regional conflict, Israel supplied approximately 15% to 20% of Egypt's total natural gas needs, as reported by the Joint Organizations Data Initiative (JODI).

However, in the wake of the Iran-Israel war, key Israeli offshore natural gas fields like Leviathan and Karish have been indefinitely shut down in June 2025. As a result, the daily gas supply from Israel to Egypt has been severely curtailed. This disruption has forced Egypt to reconsider its energy strategy to ensure energy security.

Marwa Omar, Assistant Professor of Economics at Helwan University, tells Arab Finance: “The conflict has disrupted energy supplies and triggered a sharp rise in global energy prices, adding further strain on the Egyptian economy.”

“This has exacerbated challenges such as inflation and currency devaluation. Egypt’s increased reliance on imported LNG and heavy fuels has driven up energy prices, affecting consumers and industries alike,” Omar says.

Government Actions to Secure Energy Supply

In response to the evolving energy landscape and the imperative to mitigate projected electricity disruptions, the Egyptian government has launched a comprehensive electricity rationalization plan.

Outlined by the Egyptian Cabinet, this proactive strategy aims to optimize energy consumption across various sectors, ensuring stability of supply during periods of heightened demand and reduced imports.

The plan includes key measures: A 60% reduction in lighting for streets and public squares, mandatory lights-off in all government and public facilities after 8:00 PM, public facilities’ air conditioning systems must be set to a minimum of 25°C, billboard lighting must be turned off between 9:00 PM and midnight, and retail and commercial businesses shall close by 11:00 PM.

This strategy aims to conserve energy on a large scale, reinforce commitment to energy conservation within the public sector, and promote more efficient cooling practices. It targets non-essential energy consumption, while managing peak demand and reducing late-night electricity usage.

Commenting on this plan, Doaa Salman Abdou, Ph.D., FJEA, Head of Economics Department at MSA Faculty of Management Sciences, tells Arab Finance: “Egypt’s power grid is under serious pressure, and the government’s new energy-saving measures are necessary, even if not perfect.”

“Scheduled daily power cuts of 1-2 hours in some areas, fuel prioritization for power plants, and public awareness campaigns will help. But they will not fully prevent outages in July and August due to demand spikes during extreme heat, and our infrastructure is still catching up,” she adds.

“The good news is that the government is taking action. It secures extra liquefied natural gas (LNG) shipments, cuts back on natural gas exports to keep local power plants running, and manages electricity loads carefully,” Abdou notes.

“But if compliance slips or temperatures soar higher than expected, blackouts could still happen in some areas. It is a balancing act, and while the plan should ease the worst of it, the risk remains,” she warns.

On the other hand, Wafaa Ali, a PhD holder and an economic and energy expert, explains, “Amid the ongoing geopolitical tensions, the energy file and its goals and requirements have been more critical than ever.”

“Thus, the energy file has become a common axis in a volatile world where it drives both politics and economy,” she says.

“The colossal GREGY project, which links Egypt and Greece with a 3,000-megawatt connection, reflects Egypt's role as a global energy trading hub. This sustainable development initiative will be part of an energy mix that will create an interconnected network across the Mediterranean, opening new horizons for energy security.” Ali elaborates.

Economic Impact of Electricity Rationalization

The government's electricity rationalization plan carries multifaceted economic implications for Egypt. In terms of tourism, Abdou explains: “Most hotels and resorts will be shielded. The government knows they are too vital to risk. But smaller shops, cafes, and local vendors will feel the pinch. Power cuts mean higher costs due to expensive diesel generators, driving away customers when air conditioning stops working.”

Large factories located in industrial zones are likely to be unaffected, as they are exempt from power cuts. However, smaller workshops operating outside these zones may struggle to cope with the disruptions. Major malls in strategic locations will probably stay open, but local neighborhood shops might experience unpredictable operating hours.

In summary, while electricity cuts will affect the economy, the government is focusing its efforts on protecting the most vital sectors, according to Abdou.

Egypt's Path Toward Doubling Down on Renewables

To avoid a crisis this summer, Abdou believes Egypt needs to do several things, including "going all-in on renewables.”

“Solar and wind are no longer optional, they are essential. Projects like Benban Solar Park need to expand quickly. Smart grids and better storage, like batteries, could prevent waste,” she highlights.

“Egypt needs to maximize natural gas output from Zohr and other fields, enforce energy efficiency, and bring in private investments. More partnerships with energy firms could speed up progress," Abdou explains.

Egypt has an opportunity to leverage its renewable energy potential. The country ranked first among Arab countries for having the highest renewable energy generation capacities in 2023, with a total of 6,709 megawatts, as reported by the Cabinet's media center in January 2025.

In this regard, Ali notes, "Egypt has strived to be a pioneering energy leader par excellence, in light of an integrated renewable energy strategy encompassing solar, wind, and the new member of the renewable energy family, green hydrogen.”

Omar agrees, stating: “Investing in domestic production and renewable energy is essential to ensuring energy security. Additionally, strengthening ties with neighboring countries for energy sharing and infrastructure development can boost the energy sector’s resilience and stability.”

“Egypt is actively pursuing energy cooperation with countries like Cyprus, Greece, and Saudi Arabia to establish itself as a regional energy hub,” she notes.

“Despite all the global headwinds caused by geopolitical tensions and their impact on economies worldwide, Egypt has not allowed these issues to stall its progress. Instead, the country has pressed forward to engage with major entities, aiming to generate 42% of its energy from renewable sources by 2040,” she points out.

On the other hand, raising awareness among Egyptian citizens is crucial for facing any electricity challenge. “Public awareness and behavioral change are key to the success of energy rationalization and sustainability initiatives. When citizens engage in energy conservation, it can lead to significant savings and reduce strain on the energy grid,” Omar explains.

“Educational campaigns that emphasize the importance of reducing energy consumption, such as turning off lights during peak hours and using energy-efficient appliances, can empower individuals to take action. The Egyptian government has been actively promoting energy efficiency and conservation through various campaigns,” she says.

In a geopolitical landscape marked by escalating tensions, Egypt finds itself at a critical juncture. It needs to address immediate energy security concerns while laying groundwork for a resilient and sustainable future.

Natural gas supply disruptions due to regional conflicts, compounded by rising domestic demand, have highlighted the urgent need for comprehensive and strategic responses.

While the government's proactive electricity rationalization plan demonstrates a clear commitment to safeguarding national interests and ensuring essential services, it reflects varied economic impacts across sectors.

By Sarah Samir

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