The Suez-Hormuz scissors grinding North Africa’s economies

North Africa is an invisible casualty of a war it did not start. Every escalation across the Red Sea and the Arabian Gulf tightens a pair of scissors whose blades are closing from opposite directions, threatening the region’s economies. One blade slices foreign currency earnings by emptying the Suez Canal. The other drives up the cost of fuel, fertilizer and food imports through disruptions around the Strait of Hormuz. Egypt, Morocco and Tunisia are trapped between them, while Algeria and Libya are poised to mistake a temporary oil windfall for economic security.
Most discourse treats the disruption of the Suez Canal and the Strait of Hormuz as separate crises. Financial markets price them separately and governments respond to them separately. Yet, to North Africa nations, these disruptions are a single economic earthquake that threatens economies that were heavily indebted even before the latest crisis began. It is this debt overhang that is now converting external shocks into domestic fiscal emergencies.
As a result, regional forecasts paint a gloomy picture for the foreseeable future. The World Bank expects economic growth across the Middle East and North Africa, excluding Iran, to slow sharply in 2026 after cutting its earlier projections by more than 2 percentage points.
Moreover, lowered regional growth expectations are creating an even more unsettling reality. Egypt, Morocco and Tunisia confront shrinking fiscal space precisely as import costs accelerate. Meanwhile, Algeria and Libya benefit from higher oil prices but those gains conceal structural weaknesses that higher commodity prices alone cannot resolve.
The Suez Canal has been one of Cairo’s most reliable sources of foreign exchange for more than a century. Recent disruptions caused canal revenues to plummet from a record $9.4 billion in the year ending June 2023 to $3.9 billion 12 months later as shipping diverted away from the Red Sea. Senior Egyptian officials have acknowledged losses measured in the billions of dollars, while the International Monetary Fund estimates that about 70 percent of Suez Canal revenue has been lost as regional security continues to deteriorate. Every diverted vessel therefore removes more than transit fees alone. It reduces the supply of hard currency needed to service debt, finance imports and stabilize the Egyptian pound.
Far from a mere “debt problem,” Egypt has become a case study in how geopolitical disruption can rapidly become sovereign debt distress. Gross financing needs remain close to 40 percent of gross domestic product over the coming years, while the assumptions underpinning the country’s expanded $8 billion IMF program were built around a far more stable regional trading environment. Tourism and remittances have softened some of the immediate pressure but neither can replace one of the world’s busiest maritime corridors as a durable source of foreign exchange. 

North Africa is an invisible casualty of a war it did not start. Every escalation across the Red Sea and the Arabian Gulf tightens a pair of scissors whose blades are closing from opposite directions, threatening the region’s economies.

Hafed Al-Ghwell

Pressure does not end at the treasury. Fiscal consolidation has continued through fuel subsidy reductions and higher domestic energy prices, even as inflation has eroded household purchasing power. Such measures are economically understandable within an IMF program. However, every dollar lost in canal revenue narrows the government’s room to cushion households from runaway inflation. External conflict, sovereign debt and domestic austerity have therefore become mutually reinforcing rather than independent pressures.
For Rabat, unlike Egypt’s “Suez shock,” the damage is less visible. No single revenue stream has suddenly disappeared. Instead, production has become incrementally more expensive across the economy. Every increase in oil prices raises transport costs. Every disruption around the Strait of Hormuz pushes up the price of industrial inputs. Every depreciation of the dirham makes imported goods more costly. Individually, each pressure appears manageable. Collectively, they compress growth from every direction.
Take Morocco’s fertilizer industry, for instance. OCP Group, the world’s largest phosphate exporter, depends on about 3.7 million tonnes of sulfur imports each year, much of it sourced from the Gulf. Any sustained disruption to shipping through the Strait of Hormuz therefore impacts more than just energy markets. Sulfur becomes scarcer, fertilizer production becomes more expensive and global supply tightens, threatening food security. Farmers across Africa, for example, ultimately pay higher prices for the same inputs, even though the original disruption occurred thousands of kilometers away.
Furthermore, Morocco is simultaneously a major producer of cereals, citrus and olives, while serving as a critical supplier of phosphate-based fertilizers to international markets. Higher diesel prices increase cultivation costs. More expensive fertilizer reduces margins. Lower profitability discourages planting and investment. Food production weakens precisely as consumers face higher prices, recreating many of the pressures experienced after the commodity shocks triggered by Russia’s invasion of Ukraine. North Africa therefore confronts the prospect of a second fertilizer shock in barely four years, with far less fiscal capacity available to cushion its effects.
Oil exporters, on the other hand, appear to occupy a different reality. Brent crude approaching $100 per barrel has strengthened Algeria’s public finances, while Libya has lifted production to its highest level in a decade. Viewed through quarterly revenue figures alone, both countries seem insulated from the pressures confronting their neighbors. Such conclusions, however, prove misleading because they confuse higher income with greater resilience.
Algeria continues to derive more than 90 percent of its export earnings from hydrocarbons, while directing most new investment back into the same sector. Rising domestic gas consumption is reducing future export capacity even before European demand begins adjusting to stricter methane regulations and broader diversification away from Algerian supply.
Libya’s position is even more precarious. Higher oil receipts continue to finance competing political authorities, while a negligible tax base and fragmented institutions leave public finances almost entirely dependent on commodity prices. Additional revenue is financing current expenditure rather than broadening the productive economy.
North Africa is therefore dividing neither into winners and losers nor into importers and exporters. Different economies are simply being cut in different ways. Egypt loses foreign exchange. Morocco imports inflation. Tunisia inherits both pressures with limited fiscal capacity. Algeria and Libya receive temporary fiscal relief while postponing the structural reforms that could outlast another commodity cycle.
It is a vulnerability that ultimately lies in the subregion’s economic structures rather than in the conflict itself. A rash of external shocks in the last decade have consistently exposed long-standing dependencies on transit revenues, imported energy, hydrocarbons and sovereign borrowing. The Suez-Hormuz “cut” is merely accelerating pressures that already existed and continued disruption therefore threatens to heighten the pressure on a region that faces sluggish growth rates that barely exceed population expansion.

• Hafed Al-Ghwell is senior fellow and program director at the Stimson Center in Washington and senior fellow at the Center for Conflict and Humanitarian Studies.
X: @HafedAlGhwell