While the Houthi’s continuous disruption of Western shipping routes and the resulting attention from Washington dominate financial news, it’s important to understand that the negative effects go beyond hurting retailer margins and Western consumers.

In addition to the direct casualties of the regional conflict, the less noticeable impact of a weaker Egyptian economy due to declining Suez Canal revenues adds complexity to the ongoing political turmoil in the region.

Egypt faces various challenges like high import dependence, decreasing foreign reserves, rising inflation, and fragile public finances, leading to FX speculation. Non-deliverable forwards suggest a significant devaluation of the Egyptian Pound is on the horizon

Chart 1:USDEGP vs USDEGP 12 Month NDF

While the root causes of prevailing pessimism are hard to ignore, we believe that the associated risks are becoming….