Egypt braces for tough regional tests in 2026

A pivotal crossroads

In 2026, the battle to keep Gaza Palestinian and avert the forced displacement of its two million residents could reshape regional alliances and test Egypt's resolve. More than two months into the ceasefire, progress has stalled in Phase One. Hamas fulfilled its key obligations by releasing all hostages, both dead and alive (one is unaccounted for), but Israeli bombing continues, and Hamas still refuses to disarm.

Behind closed doors in Washington, the $112bn 'Project Sunrise' is taking shape. Masterminded by US President Donald Trump's close advisors Jared Kushner and Steve Witkoff, it will take more than 20 years to implement and revives Trump's earlier 'Middle East Riviera' concept, which he first floated in February 2025.

It envisions turning the bomb-scarred landscape into a gleaming high-tech metropolis with luxury beachfront resorts, skyscrapers, high-speed rail, AI-powered smart grids, and pristine coastal developments. Conspicuously absent is any clear provision for Gaza's population, currently crammed into less than half their territory, living in rubble and hardship.

Israel wants to confine residents to the south, near the Egyptian border, freeing northern and coastal areas for redevelopment, primarily benefiting international investors and Israeli interests rather than Palestinians. This is sounding the alarm in Cairo, as it means a mass exodus into Egypt's Sinai is all but inevitable—a scenario Egypt has been at pains to reject.

Designed in part to overshadow a more modest $53bn five-year reconstruction initiative, which would commit to keeping Palestinians in Gaza, Project Sunrise accelerates a moment of reckoning. Egypt's firm stance against population transfer now clashes head-on with US and Israeli preferences for clearing and redeveloping the territory.

This high-stakes confrontation is poised to profoundly influence Cairo's relations with Washington and Tel Aviv throughout 2026 and potentially beyond, prompting tougher Egyptian measures, such as bolstering military and security deployments in Sinai to safeguard its borders and principles.

Southern shadow

Meanwhile, Sudan's civil war veered into a perilous new territory in 2025. The Darfur-based Rapid Support Forces (RSF) militia, which is fighting the army, took further territory as it swept across western cities in a relentless advance. The army, based in Port Sudan, looks increasingly cornered, clinging mainly to pockets in the east. Winning support from Russia is now existential.

For Egypt, this is no distant spectacle. Chaos in Sudan affects its own national security as well as its economy, with waves of refugees having already fled RSF advances. Beyond that, Sudan and Egypt share not only a border but history and strategic interests, not least in the life-giving waters of the Nile River.

A Russian naval base in Port Sudan appears to be the Sudanese armed forces' last hope, yet this is only 270km from Egyptian border. Cairo fears that this could draw in counterforces, including the US, transforming the vital Red Sea waterway into a flashpoint of great-power rivalry. Anything that endangers Red Sea shipping lanes by extension risks the Suez Canal transit fees, which are worth billions of dollars to Egypt annually.

Egypt is far from passive. In December 2025, Egyptian President Abdel Fattah el-Sisi noted a joint defence agreement with Sudan from 1976, signalling a readiness for potential military intervention to halt a total RSF takeover of the country. This could dramatically tip the scales in the conflict, reshaping the power dynamics in Egypt's favour, yet, if reports are to be believed, the RSF has foreign backers with deep pockets who may entangle Cairo in a long, costly, and unwinnable war, so the risks are grave.

Clouds over the Nile

Another problem is Ethiopia's triumphant inauguration of its dam in September 2025—Africa's largest hydroelectric project on the Blue Nile. This multibillion-dollar behemoth is now fully operational, holding back vast volumes of water. With a population of more than 110 million and water scarcity already biting hard, the dam is a major national security issue because the Nile supplies nearly all of Egypt's freshwater.

The GERD's massive reservoir now gives Ethiopia control over the river's primary tributary. For over a decade, as the dam rose on the Ethiopian highlands, Cairo desperately pushed for a binding international agreement on its filling and operation, but those negotiations fell apart amid acrimony and accusations from both sides.

Today, the dam is a towering reality, a knee on Egypt's neck that potentially threatens millions. Egypt has repeatedly appealed to the UN Security Council, forged military alliances with Ethiopia's neighbours, and staunchly opposed Addis Ababa's ambitions for Red Sea access, in a bid to encircle its landlocked water rival.

However, the situation appeared to change again towards the end of December 2025, when Israel became the first member of the United Nations to recognise Somaliland, a breakaway province with a Red Sea coast. Israel wants maritime access within striking distance of the Yemen-based Houthis. Egypt is concerned that Israel will collaborate with Somaliland and Ethiopia, given that Ethiopia also seeks maritime access through Israel.

This stand-off is poised to dominate Egypt's foreign policy in the Horn of Africa through 2026 and beyond, with tensions already flaring over recent floods blamed on erratic water releases. If Ethiopia presses ahead with plans for additional dams on the Nile, it could become a full-blown regional crisis, testing the fragile balance of power along one of the world's most vital rivers.

Mediterranean gas

In in 2025, Egypt and Türkiye made dramatic strides towards full diplomatic normalisation after a decade of frosty relations based by clashing ideologies and rival claims over gas reserves in the Eastern Mediterranean. Today, the two countries increasingly find themselves on the same page, and have enjoyed recent high-level visits, joint naval drills, and a flurry of trade deals, pushing bilateral commerce towards a $15bn target.

This budding détente will be tested as early as 2026 over the Eastern Mediterranean. In early December 2025, at a Cairo summit, President Sisi and Libyan general Khalifa Haftar, who controls much of eastern and southern Libya, agreed to delineate maritime boundaries between Egypt and Libya. If signed in 2026, this would align with Egypt's prior maritime pacts with Cyprus, Greece, and Saudi Arabia, unlocking exclusive rights to explore and drill for gas in contested zones.

This comes up against Türkiye's controversial 2019 memorandum of understanding with Tripoli's then-government, which carved out expansive sea corridors, ignoring Greek islands and overlapping claims from Egypt and others. Cairo described that pact as illegal. Dealing with Haftar could now reignite old frictions with Ankara over energy exploration and naval posturing.

As Egypt treads a diplomatic tightrope—safeguarding its sovereign rights without torpedoing hard-won gains with Ankara—the outcome will likely redefine power dynamics in the Eastern Mediterranean for years to come, testing whether pragmatism can prevail over the lure of underwater treasures. From Gaza to chaos in Sudan to Ethiopia's new dam to the careful rebuilding of ties with Türkiye, Cairo has balanced risks while protecting core interests. The road ahead in 2026 alas looks no easier.