Egypt’s Oil and Gas FDI Pipeline Boosts External Resilience: Morgan Stanley

Egypt’s external vulnerability to higher oil prices is materially lower than previously assumed, with record remittance inflows and greater exchange-rate flexibility providing a crucial cushion against external shocks, noted a research report by the American investment bank Morgan Stanley

Morgan Stanley noted that the broader impact of the Iran conflict on tourism and remittances, previously projected by the bank, has not materialised, as the conflict has remained largely contained. Remittances remained historically high throughout FY2026, with estimates that it would mount to $46 billion in FY2026, up from $36 billion in FY2025. This encouraged the bank to raise its FY2027 forecast to $43 billion.

The note, aiming to shed light on the key lessons about the Egyptian economy since the bank’s last review five months ago, said Egypt’s stronger remittances, lower oil-price assumptions, and improving foreign direct investment (FDI) prospects have made its fiscal year  (FY) 2027 external financing outlook more manageable across three different scenarios for global oil prices.

Morgan Stanley’s first scenario presents the best case for Egypt, assuming regional tensions ease, the Strait of Hormuz reopens, and oil production normalizes. Strong US exports and weaker Chinese imports would create a supply glut, pushing Brent to $65 per barrel in late 2026 and $60 in 2027. Lower energy costs would cut Egypt’s import bill and narrow the current-account deficit to $13 billion.

FDI is expected at $15 billion in FY2027, supported by oil and gas investments and the government’s asset-sale program. External financing needs of $25 billion would be nearly matched by $24 billion in sources, leaving a $1.4 billion gap. Multilateral financing of $4 billion would more than cover this, resulting in a $3 billion surplus.

In Morgan Stanley’s second scenario, the base-case scenario, the Strait of Hormuz partially reopens, with Brent averaging $75 per barrel in late 2026 and $70 in early 2027. Egypt’s current-account deficit would edge up to $14 billion, but strong remittances of about $43 billion would help absorb the higher energy costs. Net FDI is projected at $14 billion, while scheduled multilateral financing would broadly cover the external gap.

In the third scenario, Morgan Stanley assumes unresolved geopolitical risks, constrained oil flows through Hormuz, and elevated prices. Brent is projected at $100 per barrel in Q3 2026, averaging $95 in H2 2026 and $80 in H1 2027. Egypt’s current-account deficit would widen to $17 billion, while net FDI would ease to $13 billion as uncertainty delays new commitments.

External financing needs would rise to $29 billion, with sources excluding portfolio flows at $22 billion, leaving a $7 billion gap. After scheduled multilateral financing, a residual shortfall of about $3 billion would remain.

Moreover, the analysis suggests that a potential moderation in Egypt’s overall FDI inflows could be partly offset by continued investment in the oil and gas sector.

The bank had previously warned that Egypt’s total FDI inflows could fall toward their historical low of around $10 billion (about 2.5% of GDP) amid heightened geopolitical risks. In contrast, the new report highlights that stronger investment in oil and gas exploration and field development, together with renewed momentum in the government’s asset-sale program, should offset any decline in FDI and support the balance of payments.

The International Monetary Fund (IMF) has also assessed Egypt as resilient to the regional conflict, citing exchange-rate flexibility, fuel-price adjustments and spending controls. It said record remittances, robust tourism receipts and a gradual recovery in Suez Canal revenues helped contain the impact of higher energy prices, while gross international reserves remained strong.