The day after Gaza: Fragile peace, new regional economy
Ceasefire ushers in cautious optimism, and a geopolitical reshuffle led by Washington.
The approval of the first phase of the agreement between Israel and Hamas, which includes a ceasefire, a partial IDF withdrawal from Gaza, the release of hostages in exchange for prisoners, and expanded humanitarian aid, signals a measured reduction in regional risk across the Middle East. This shift could soon carry economic implications in several sectors.
However, it is still too early to build expectations. Past experience in the region has shown that optimism and hope can quickly give way to renewed violence and destruction. The trajectory of the Middle East in the coming weeks and months will depend largely on the determination, consistency, and commitment of the American administration to sustain calm and oversee reconstruction.
For the agreement to advance to the second phase of U.S. President Donald Trump’s plan, the “day after” in Gaza, effective management will be crucial. At this stage, it appears that the Trump administration is committed to fully implementing the deal. The cessation of war in Gaza represents the administration’s most significant diplomatic achievement since the president’s return to the White House in January. Unlike the war in Ukraine, the U.S. has direct leverage in the Middle East, both over Israel and the mediating countries, which made this agreement possible and could serve as a foundation for future stabilization.
Implementing the first phase lays the groundwork for a gradual reduction in regional risk, an economic achievement in itself. Still, the benefits are expected to appear in small, measured stages: first in the insurance and shipping sectors, later in tourism and trade, and ultimately, if calm endures and confidence grows, in increased regional infrastructure investment, potentially tied to a wider normalization process. For now, that vision remains distant.
Egypt: Suez in Decline, Tourism on the Rise
Egypt, which hosted the decisive round of mediation talks last week, enters this phase with sharply contrasting economic trends. On one hand, there has been a steep erosion in foreign exchange revenue from the Suez Canal, one of the country’s most critical economic arteries, while on the other, tourism has rebounded to record levels.
According to official data, Egypt’s Suez Canal revenues in the 2024–2025 fiscal year (ending June) totaled roughly $3.6 billion, down more than 45% from the previous year. Independent estimates place the drop at over 60%. The number of vessels transiting the canal has halved, from 26,000 in 2023 to about 13,000 in 2024. To restore traffic, the Canal Authority reduced rates, but most major shipping companies still prefer the longer route via the Cape of Good Hope due to Houthi threats in the Red Sea. Even now, despite the Gaza ceasefire, insurers and shipping firms are signaling only a slow and cautious recovery.
Tourism, however, tells a different story. Egypt’s tourism revenues last year reached $15.3 billion, nearly offsetting the Suez shortfall. If calm continues, this sector is expected to break new records, boosted by the upcoming Christian holiday season.
Despite the Gaza war’s toll, Egypt’s economy has shown signs of recovery this year, supported by large-scale Gulf investment, tens of billions of dollars directed toward real estate and tourism projects. GDP growth is projected at 4% this year (up from less than 2.5% last year), with inflation down to 11.7%, its lowest in years. Still, with debt at roughly 85% of GDP, Egypt remains vulnerable. Reconstruction in Gaza, with Egyptian involvement, and the revival of shipping and tourism could further bolster the trend.
Despite its central mediation role, the Trump administration has kept a measured distance from President Abdel Fattah el-Sisi’s government, reflecting Washington’s transactional approach. While Egypt’s stability remains strategically important, its limited resources constrain U.S. interest. However, Trump’s visit to Cairo to formally launch the agreement, and Egypt’s potential role in Gaza’s reconstruction, may restore its influence in Washington.
Qatar: Gas Exports Set to Soar
Qatar has emerged as one of the biggest diplomatic winners from the Gaza ceasefire. The same state that once funded Hamas, hosted its leaders, and gave them a media platform via Al Jazeera now enjoys global recognition as a key mediator. Its close coordination with the U.S. has made Doha arguably Washington’s most relevant Arab ally, even more than Saudi Arabia or the UAE.
President Trump’s order upgrading security relations between Washington and Doha cements this partnership. The backing is crucial as Qatar pursues a tens-of-billions expansion of its natural gas output, aiming to double production to 142 million tons per year by 2030. The project, which also involves U.S. energy companies, will secure long-term contracts with Europe and Asia, guaranteeing steady foreign exchange inflows and reinforcing Qatar’s position as a reliable energy supplier amid global uncertainty.
Financially and diplomatically, Qatar’s mediation role, and its new alignment with Washington, will enhance its global influence, particularly as discussions turn toward Gaza’s reconstruction.
Turkey: Fat Contracts with Washington
Turkey has also strengthened its hand. President Recep Tayyip Erdoğan’s renewed engagement, including a friendly White House meeting last month, was instrumental in advancing the ceasefire. Erdoğan leveraged his influence over Hamas leaders based in Turkey to help secure the deal.
The Trump-Erdoğan relationship rests on overlapping geopolitical and economic interests. Beyond the Middle East, Washington views Ankara as a counterweight to Russia. Trump is advancing a 20-year deal under which Turkey will purchase 70 billion cubic meters of American LNG, a major blow to Russian energy exports and a boon to U.S. producers.
Simultaneously, Washington is reviving large-scale arms and aviation deals, including Boeing jets, F-16s, and small nuclear reactors, worth tens of billions. Turkey may also be reinstated into the F-35 program, from which it was excluded after buying Russian S-400 systems.
For Erdoğan, the closer ties with Washington not only strengthen his domestic political standing but also promise renewed investment and economic stability. While Turkey’s inflation remains high at 33.3%, analysts expect lower interest rates and greater foreign capital inflows amid regional stabilization.
Saudi Arabia: The Big Money Will Come from Riyadh
Saudi Arabia, the Arab world’s heavyweight, was notably sidelined in the final mediation stages, largely due to its lack of leverage over Hamas. But that is expected to change as the reconstruction phase begins. Riyadh’s deep pockets will be indispensable for rebuilding Gaza, especially if the Trump administration demonstrates sustained commitment.
The kingdom’s participation could also help revive the Abraham Accords, paving the way for broader Arab-Israeli normalization. In return, Israel would likely have to offer at least symbolic movement toward recognition of a Palestinian state, a long-standing Saudi condition.
The war interrupted Saudi Arabia’s ambitious economic diversification drive and its plans to host global events like Expo and the World Cup. Stabilization, particularly in Red Sea shipping lanes, is therefore a top Saudi priority, vital to attracting foreign investment for its massive development projects.
United Arab Emirates: Advancing AI with U.S. Support
The UAE, which provided over $1 billion in humanitarian aid to Gaza, played a quieter diplomatic role, constrained by its limited influence over Hamas. The country faced domestic criticism for maintaining ties with Jerusalem during the war but is now poised to reassert itself during Gaza’s reconstruction.
Washington has reportedly approved multi-billion-dollar export licenses for Nvidia AI chips to the UAE as part of a broader agreement that includes building a major data center in Abu Dhabi, a move designed to position the Emirates as a pro-American supercomputing hub in the region.
Yemen and the Houthis: A Lingering Threat to Maritime Routes
The war in Gaza disrupted global trade after Houthi attacks on Red Sea shipping routes began in late 2023. The return of traffic through the Bab el-Mandeb–Suez corridor will require sustained stability. War insurance premiums remain high, between 0.7% and 1% of a ship’s value, keeping many carriers cautious.
The ceasefire announcement has already pushed shipping stocks lower in anticipation of falling rates, but actual recovery will take months. Meanwhile, Houthi leader Abdelmalik al-Houthi has vowed to “continue monitoring developments” and “increase support for Palestinians,” raising concerns about renewed maritime disruptions. Past ceasefires in Yemen have often been used by the Houthis to rearm, a pattern that could repeat if tensions flare again.
