Egypt Inks Multi-Billion Dollar Energy Deal With Israel Despite Gaza Tensions

After months of threatening to walk away from its peace treaty with Israel, Egypt has instead moved to strengthen ties with Jerusalem by securing its largest-ever energy deal.

On August 7, Cairo signed a $35 billion agreement with Israeli energy company NewMed that will triple the flow of natural gas to Egypt from Israel’s vast Leviathan field, which already supplies about 4.5 billion cubic meters (bcm) annually. NewMed CEO Yossi Abu claims the arrangement will save Egypt a “tremendous amount” compared to liquefied natural gas (LNG) imports. The agreement also cements Israel’s role as a regional energy supplier.

The deal comes as Egyptians express outrage over Israel’s war in Gaza and disappointment at Cairo’s perceived isolation in regional diplomacy. Egyptian officials, including President Abdel Fattah el-Sisi, have emphasized Egypt’s role in ceasefire talks and aid delivery to Gaza. The advancement of the agreement despite the Gaza backdrop underscores that the Cairo-Jerusalem relationship is both durable and essential.

Egypt’s Deepening Dependence on Israeli Energy

Egypt began importing gas from Leviathan in 2020 as domestic production lagged. Cairo’s own output continued to slide in 2022, derailing Cairo’s ambition to become a regional export hub and forcing it to depend more heavily on Israeli supplies.

In May 2025, Egypt produced 3.545 bcm of natural gas, down more than 42 percent from 6.133 bcm in March 2021, according to the Joint Organizations Data Initiative (JODI).

Israeli gas now supplies roughly 15-20 percent of Egypt’s total consumption and as much as 60 percent of its total imports.

Energy Shortages in a Struggling Economy

The new deal offers a lifeline for Egypt’s ongoing energy crisis. With domestic supply falling short, Cairo has spent billions importing LNG to meet demand, draining already depleted foreign reserves. The resulting shortages have fueled inflation, crippled manufacturing, and intensified public anger over the country’s broader economic collapse.

The 12-day Israel-Iran war underscored Egypt’s vulnerability when Jerusalem temporarily halted exports from Leviathan. Although gas began to flow again as Israel ended its military operations, the episode exposed Cairo’s dependence on an external supplier. That vulnerability is compounded by Egypt’s surging population, jumping from 100 million in 2015 to 115 million in 2023.

Meanwhile, Israel’s gas production jumped more than 70 percent between 2014 and 2024.

Leveraging Energy Ties To Anchor U.S. Policy

For Washington, Egypt’s deepening reliance on Israeli gas presents an underused source of leverage in a strained bilateral relationship. At a time when U.S. aid to Egypt faces mounting scrutiny, Cairo’s largest-ever energy deal with an Israeli firm is a reminder that the peace framework and its economic dividends remain vital to Egypt’s stability.

Washington can quietly reinforce this reality by encouraging Egypt to deepen cooperation with regional energy partners through the East Mediterranean Gas Forum (EMGF). Such engagement would align Egypt’s energy policies with those of its neighbors and help streamline cross-border infrastructure investments. By highlighting the benefits Egypt derives from regional integration, particularly in energy, and by structuring diplomatic engagement to foster greater economic interdependence with Israel, Washington can anchor Cairo more firmly in a stable regional framework.

Mariam Wahba is a research analyst at the Foundation for Defense of Democracies (FDD). For more analysis from Mariam and FDD, please subscribe HERE. Follow Mariam on X @themariamwahba. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.