Egypt’s annual inflation rate climbed to its highest level since May 2025 amid fallout from the conflict between the United States, Israel, and Iran, driven largely by rising global energy prices and a depreciating local currency. According to data released Thursday by the Central Agency for Public Mobilization and Statistics (CAPMAS), consumer prices in urban areas increased 15.2% year-on-year in March, up from 13.4% in February.

Monthly inflation also accelerated, reaching 3.2% in March compared to 2.8% the previous month, marking the fastest monthly rise since February 2024. The surge comes during the first full month of hostilities in the Middle East, with Egypt feeling significant economic repercussions despite its geographic distance from the conflict zone in the Arabian Gulf.

The country’s heavy reliance on imports, coupled with a substantial withdrawal of foreign portfolio investments, has placed considerable pressure on the Egyptian pound, which hit record lows in recent weeks. The currency weakened from approximately 47.9 per U.S. dollar before the conflict erupted to around 53.3 recently, although it rebounded somewhat following announcements of a ceasefire, posting its largest single-day gain since 2017.

Egypt’s government has also faced rising costs for energy, prompting a series of price increases amid ongoing geopolitical uncertainty. In March, authorities raised fuel and public transport prices. More recently, electricity tariffs were increased by an average of 16% for higher-consuming households and 20% for commercial users, further contributing to inflationary pressures.

Food and beverage prices—the largest component in the inflation basket—rose 5.8% annually in March, underscoring the broader impact on consumer living costs. These developments slow the country’s efforts to reduce inflation, which peaked at a record high of 38% during an economic crisis in September 2023.

In response to the inflationary trend, policymakers face mounting pressure to tighten monetary policy. After a series of interest rate cuts last year aimed at encouraging private investment and reducing government debt servicing costs, the central bank took a cautious approach in its latest meeting on April 2, leaving rates unchanged at 19% for the first time since November. The regulator emphasized a “wait-and-see” stance to maintain inflation expectations and restore disinflation.

Looking ahead, the central bank’s next policy meeting is slated for May 21. Some analysts, including economists at Goldman Sachs, predict the possibility of significant rate hikes this year—potentially up to 200 basis points—if inflationary pressures stemming from the regional conflict persist.