"This drop is clearly due to the political tensions in Sinai," Tamer Nigm, head of sales and trading at Cairo- based Watheeqa Securities Brokearage told Bloomberg.
"There are fears that the situation may escalate," Nigm said.
The country's main index EGX 30 fell 3.24 per cent to 4,593.39 points. The broader indexes EGX 70 and EGX 100 plunged by retreated 2.75 and 3.06 per cent to 550.45 and 836.62 points respectively.
Egypt's heavyweight Commercial International Bank (CIB) shed 2.66 per cent to LE26.01 per share. EFG-Hermes, the country's biggest investment bank by market value, dipped by 5.09 per cent to LE16.05 per share.
Orascom Construction Industries shed 3.33 per cent to LE244.17 per share. Orascom Telecom, the largest Arab mobile operator by subscribers, shed 2.95 per cent LE3.29 per share.
Mobinil fell by 3.79 per cent to LE98.22 per share.
Other markets in the Middle East region were also in the red. UAE and Qatar markets ended with a sell-off across sectors, with jittery investors dumping stocks on macro-economic fears as the possibility of US and Europe heading back into recession took centre stage.
Property stocks led by turnover in Dubai, with Emaar Properties falling 1.8 per cent and Arabtec down 0.7 per cent. The benchmark was off 4.2 per cent on the month.
Abu Dhabi's Dana Gas declined 1.8 percent after reports the energy firm picked banks to arrange its planned listing on the London Stocks Exchange.
Losers outnumbered gainers 21 to three on the index
"Concerns over economic indicators and fears of the economy going back into a recession-- that kind of concern will have an effect on commodity prices, petrochems and our markets," said Haissam Arabi, chief executive and fund manager at Gulfmena Investments. "What we're seeing is natural."
"We're starting to shift from aggressive names to domestic names because fundamentals remain strong in the GCC. This might create opportunity for banks to pick up. They're doing well and are cheap right now," Arabi added.
Dubai's index fell 1.1 per cent to 1,453 points and Abu Dhabi's market also slipped 1.1 per cent to close at 2,556 points.
Elsewhere, Qatar's index ended 1.2 per cent lower at 8,096 points, but Vodafone Qatar limited losses after rising 0.6 per cent. All other stocks fell with Masraf Al Rayan - most active by volume - dropping 0.9 per cent.
Muscat's index ended 0.6 percent lower at 5,492 points, easing from Thursday's 10-day high. Battered stock Renaissance ended flat after it gave back marginal early-session gains, triggered after company officials said Renaissance will meet its short-term commitments as it focuses on turning around Topaz, its troubled engineering unit.
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